Question

Imagine a city council decides that the market price for student rental apartments is too high. It passes a law that establishes a rental price ceiling of $600 a month. The result of the price ceiling is a shortage. Which of the following has most likely caused the shortage?

a) An increase in demand for student rental apartments
b) A decrease in the supply of student rental apartments
c) An increase in the market equilibrium price
d) A decrease in the quantity demanded for student rental apartments

Answer 1

A rental price ceiling of $600 a month has caused a shortage of student rental apartments. The most likely cause of this shortage is a decrease in the supply of student rental apartments.

Step-by-step explanation:

A rental price ceiling of $600 a month has been established, causing a shortage of student rental apartments. The most likely cause of this shortage is b) a decrease in the supply of student rental apartments. When the price ceiling is set at $600, suppliers are less willing to offer their apartments for rent due to reduced profitability, resulting in a decrease in the quantity of apartments available for rent and causing a shortage in the market.