How does rent control tend to cause persistent imbalances in the market for housing?
A)Quantity demanded exceeds quantity supplied but price cannot rise to remove the shortage.
B)Quantity demanded exceeds quantity supplied but price cannot fall to remove the surplus.
C)Quantity supplied exceeds quantity demanded but price cannot rise to remove the shortage.
D)Quantity supplied exceeds quantity demanded but price cannot fall to remove the surplus.

Question

Quizplus · Accepted Answer

Rent control imposes a price ceiling on the rental price that landlords can charge. This artificial price is often set below the market-clearing price, leading to an excess demand for housing. This means that there are more people looking for housing than there are available units, resulting in persistent imbalances in the market. Landlords may also be discouraged from renting out their properties because they are unable to recoup the full cost of their investments, leading to a decline in the quality and quantity of housing available. Because the price cannot rise to remove the shortage, renters are forced to wait longer for housing, endure lower-quality housing, or turn to the black market.

How Does Rent Control Tend to Cause Persistent Imbalances in the Market