Which one of the following is likely to be the outcome of a rent ceiling imposed below the equilibrium rent?
A)a black market for rent-controlled housing
B)an increase in the demand for rent-controlled housing
C)a surplus of housing
D)a decrease in search activity
E)a decrease in the supply of rent-controlled housing

Question

Quizplus · Accepted Answer

When a rent ceiling is imposed below the equilibrium rent, the quantity demanded for housing exceeds the quantity supplied, which results in a shortage of housing. This shortage creates an incentive for landlords to engage in black market activity, charging higher rents to evade the price ceiling. Therefore, option A is the correct answer. The other options are incorrect as they do not align with the economic theory of rent control.

Which One of the Following Is Likely to Be the Outcome