Question

Which of the following is NOT an effect of a price ceiling, such as rent control?

A. The demand for substitute goods, such as houses for sale, will increase due to the shortage of rent-controlled apartments.
B. Buildings that would normally be used as apartments are converted to business space or sold as condominiums to command higher prices.
C. More apartments will be made available in the rent-controlled zone due to the number of people willing to purchase them at a lower price.
D. At the rent-controlled price, if it is below equilibrium, there will be a shortage of apartments because there will be more buyers than sellers.

Answer 1

The effect that is NOT associated with a price ceiling, such as rent control, is the increase in the availability of apartments. Rent control typically leads to apartment shortages and various market distortions, contradicting option C.

Step-by-step explanation:

Among the listed options, the one that is NOT an effect of a price ceiling, such as rent control, is C: More apartments will be made available in the rent-controlled zone due to the number of people willing to purchase them at a lower price. Price ceilings, like rent control, often result in a shortage of the controlled commodity because at the set price ceiling, quantity demanded exceeds quantity supplied. This mismatch typically decreases the total number of apartments available rather than increasing them.

Two common effects of a price ceiling are indeed A: The demand for substitute goods, such as houses for sale, will increase, and B: Buildings that would normally be used as apartments might be converted to non-rental uses like business space or condominiums. Finally, D: At the rent-controlled price, if it is below the equilibrium price, there will indeed be a shortage of apartments, resulting in more potential renters than available rental units.