Final answer:
Effective rent is the actual cost paid by a tenant after accounting for any financial concessions from the landlord. Price ceilings often lead to lower housing quality due to reduced maintenance as landlords try to mitigate rental income loss. Demand shifts in the rental market can cause significant changes in equilibrium rental prices and quantities. The correct option is C.
Step-by-step explanation:
Effective rent is defined as c. The rent that is effectively paid by a tenant net of financial concessions provided by a landlord. This takes into consideration various incentives such as free rent for a certain period, lease buyouts, and improvement allowances that lower the actual cost of the rent over the lease term. Understanding effective rent is important because it reflects the actual economic cost to the tenant beyond the listed rental price.
Price ceilings in the housing market can lead to unintended consequences for both landlords and tenants. Landlords might convert apartments to co-ops and condos, or neglect maintenance, leading to poorer housing quality. The first rule of economics—that everything has an opportunity cost—indicates that below-market rental prices can result in compromised living conditions.
Rent control becomes a hot topic during periods of rapid rent increase, reflecting shifts in the supply and demand for rental housing. Changes in local economic conditions or preferences can shift the demand curve, resulting in higher equilibrium rental prices and quantities as illustrated in Figure 1 and explained through the shift from D0 to D1.