Assuming that the long-run supply of housing is more ________ than the short-run supply,the imposition of binding rent controls will generally ________.
A)inelastic; lead to a reduction in the housing shortage over time
B)elastic; lead to a worsening of the housing shortage over time
C)inelastic; lead to no significant change in the housing shortage
D)elastic; lead to only a temporary housing shortage
E)elastic; lead the price of rental housing to revert back to its equilibrium level

Question

Quizplus · Accepted Answer

In the long-run, the supply of housing becomes more elastic as new units can be built and existing units can be converted for rental purposes. Therefore, the imposition of binding rent controls will lead to a worsening of the housing shortage over time as landlords will have less incentive to invest in maintaining and building new housing units. This means that the short-run supply of housing will decrease, leading to a shortage in the long-run.

Assuming That the Long-Run Supply of Housing Is More ________