Other things being equal, the increase in rents that occurs after rent controls are abolished is smaller when:
A) the own price elasticity of demand for rental homes is price inelastic.
B) the own price elasticity of demand for rental homes is price elastic.
C) the own price elasticity of demand for rental homes has unitary price elasticity.
D) rented homes and owned homes are complements.
E) rented homes and owned homes are substitutes.

Question

Quizplus · Accepted Answer

When the demand for rental homes is price elastic, consumers are more responsive to price changes, leading to a smaller increase in rents when rent controls are abolished.

Other Things Being Equal, the Increase in Rents That Occurs