A rent ceiling must be set above the equilibrium rent to be binding.

Question

Quizplus · Accepted Answer

A rent ceiling that is set above the equilibrium rent will not have any impact on the market as it will not be binding. The market rent will remain at the equilibrium level, and the rent ceiling will become irrelevant. A rent ceiling can only be binding if it is set below the equilibrium rent, which creates a shortage of rental units and can lead to other market distortions.

A Rent Ceiling Must Be Set Above the Equilibrium Rent