The deadweight loss from a rent ceiling below the equilibrium rent is smallest when the supply of housing is
A) unit elastic.
B) perfectly elastic.
C) elastic but not perfectly elastic.
D) perfectly inelastic.
E) inelastic but not perfectly inelastic.

Question

Quizplus · Accepted Answer

When the supply of housing is perfectly inelastic (i.e. vertical supply curve), there is no response in quantity supplied to changes in price, and so the deadweight loss from a rent ceiling will be zero. Any increase in quantity demanded will simply lead to a shortage of housing as there is no increase in quantity supplied. Therefore, there will be no deadweight loss.

The Deadweight Loss from a Rent Ceiling Below the Equilibrium