Assuming that the long- run supply of housing is highly elastic, the imposition of binding rent controls will lead to

Question

Quizplus · Accepted Answer

If the supply of housing is highly elastic in the long run, then rent controls will lead to a reduction in the price of rental housing, which will increase the demand for rental housing. However, since the quantity of housing supplied is highly responsive to changes in price, landlords will be less willing to build new housing or maintain existing housing, which will lead to a worsening of the housing shortage over time. In the long term, the supply of housing will not be able to keep up with the demand, which will lead to a worsening of the housing shortage.

Assuming That the Long- Run Supply of Housing Is Highly