You own an apartment complex, and you want to increase the monthly rent on all units by $50 a month. When you ask the building's on-site manager, Janette, whether she thinks it's okay to raise the rent, she says that demand for rental housing is elastic. What is she saying you should do?
A) People are sensitive to price changes on big-ticket items such as housing, so you should be prepared for a drop in demand if you raise the rent.
B) People are more tolerant of price changes on big-ticket items such as housing, so it's okay to raise the rent. You won't see a change in demand.
C) People won't be able to find a close substitute to your apartments, so they'll have to absorb the price increase when you implement it.
D) Housing is perceived as a necessity, so a change in price will have relatively little effect on demand. Raising the rent will have no repercussions.

Question

Quizplus · Accepted Answer

Elastic demand indicates that consumers are highly responsive to price changes. In the context of housing, if demand is elastic, a price increase (such as raising the rent) could lead to a significant drop in demand, as tenants might look for more affordable options.

You Own an Apartment Complex, and You Want to Increase