Suppose the equilibrium rent for apartments in New York City is $2,000 per month. If the city authorities declared effective tomorrow that rents would not be allowed to exceed $1,800 per month, what do you think would happen to the relationship between supply and demand for rental apartments in New York City?
A)The supply of rental apartments would go up and rents would fall below $1800 per month.
B)There would be very little new construction of apartments in New York City and shortages would develop.
C)People would move out of New York City because of the new restrictions.
D)The demand for apartments would fall short of available supply.

Question

Quizplus · Accepted Answer

If rents were not allowed to exceed $1,800 per month, landlords would not have as much incentive to build new apartments or maintain existing ones, since they would not be able to charge as much for them. This could lead to a shortage of rental units, as landlords might choose to convert their properties to other uses or simply not invest in them as much. In the long run, this could have a negative impact on the availability and quality of housing in the city. If the city authorities declare that rents cannot exceed $1,800 per month, landlords will have less incentive to build new rental units, which could potentially lead to a shortage of rental apartments. This would also mean that some landlords may choose to convert their rental properties into co-ops, which would further reduce the supply of rental units. Additionally, the lower rents may make it less profitable for landlords to maintain their properties, which could lead to a decline in the quality of rental housing available.

Suppose the Equilibrium Rent for Apartments in New York City