Asked by Kaylee Greydanus on Jun 11, 2024
Verified
Rent controls usually set a price ceiling below the equilibrium price,and therefore:
A) quantity supplied exceeds the quantity demanded.
B) quantity demanded exceeds the quantity supplied.
C) a surplus of rental units will result.
D) all low-income recipients will clearly be helped.
Rent Controls
Government-imposed limitations on the amount landlords can charge for leasing a property.
Equilibrium Price
The price at which the quantity of a good demanded equals the quantity supplied.
- Identify the repercussions of price ceilings on the functionality of markets and the well-being of consumers and producers, with shortages as a primary consequence.
- Gain insight into the theoretical aspects and real-life ramifications of setting upper price limits on housing markets, with an emphasis on rental control policies.
Verified Answer
AS
avinash singhJun 12, 2024
Final Answer :
B
Explanation :
When rent controls are implemented and a price ceiling is set below the equilibrium price, the quantity demanded exceeds the quantity supplied. This creates a shortage of available rental units, as landlords may no longer find it profitable to rent out their properties at the reduced price. Low-income recipients may benefit in the short term from the lower rent prices, but in the long term, the shortage of rental units can lead to increased competition and higher prices as demand exceeds supply.
Learning Objectives
- Identify the repercussions of price ceilings on the functionality of markets and the well-being of consumers and producers, with shortages as a primary consequence.
- Gain insight into the theoretical aspects and real-life ramifications of setting upper price limits on housing markets, with an emphasis on rental control policies.
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