Question

The result of rent control is that __________ for housing exceeds ___________ and some potential renters may be willing to pay higher prices than the artificially low rent controlled amount.

Select the correct answer below:
a. supply; demand
b. demand; supply

Answer 1

The result of rent control is that demand for housing exceeds supply, leading to potential housing shortages and unmet demand for rental units.

Step-by-step explanation:

The result of rent control is that demand for housing exceeds supply, and some potential renters may be willing to pay higher prices than the artificially low rent-controlled amount. When a city government imposes rent control, it sets a legally fixed maximum price, which in the described scenario is $500.

Despite this, if the demand curve shifts to the right due to factors such as higher incomes or changing tastes, the quantity of rental units demanded can increase.

For example, even though the price is set at $500 with rent control, if the demand increases, there could be 19,000 rental units demanded while only 15,000 are supplied, resulting in a shortage of housing and an unmet demand. This demonstrates one of the main consequences of rent controls: they can result in fewer units being available for rent than would be without the price ceiling.