Question

Suppose the city council in a large city decides to pass a law which forces landlords to charge a maximum rent of $750/month for a one-bedroom apartment. prior to the rent control, the average rent for a one-bedroom apartment was $1,750/month.

Which is likely to occur as a result of the price ceiling?

a. landlords will begin decreasing the quality of one-bedroom apartments by not making repairs or paying for upkeep.

b. the rental market will become more efficient.

c. some landlords and renters will agree on a price of less than $750/month and not report it to the government.

d. landlords will supply more apartments to the market than they did before the price ceiling.

Answer 1

a. landlords will begin decreasing the quality of one-bedroom apartments by not making repairs or paying for upkeep.

Step-by-step explanation:

Price ceiling is when the government or an agency of the government sets the maximum price for a good or service.

Rent control is a form of price ceiling.

Price ceiling is binding when it is set below the equilibrium price.

Consequences of rent control includes :

1. landlords will begin decreasing the quality of one-bedroom apartments by not making repairs or paying for upkeep. Tjeu would do this to retain as much profits as possible since the government has placed a cap on rents.

2. Landlords would reduce their supply of houses and this would lead to scarcity.

3. Development of black markets. Black markets would develop where houses would be sold at more than $750/month .

4. The rental market would become less efficient.

I hope my answer helps you