If government establishes a ceiling on the price of rental accommodation lower than the free- market equilibrium price, then

Question

Quizplus · Accepted Answer

Those people who obtain rental units at the ceiling price will benefit, as they will pay a lower price than they would in a free-market equilibrium. However, the ceiling price will discourage new construction and could lead to a shortage of rental units as landlords may choose to convert properties to other uses where they can earn a higher return on investment. Additionally, the current stock of rental housing may not be well maintained as landlords may be less incentivized to invest in upgrades and repairs if they are not able to charge a higher rent to cover those costs.

If Government Establishes a Ceiling on the Price of Rental