Which one of the following is likely to be the outcome of a rent ceiling imposed below the equilibrium rent?
A)a black market for rent-controlled housing
B)long waiting lists of potential suppliers for rent-controlled housing
C)a surplus of housing
D)no search activity
E)Both A and B are correct.

Question

Quizplus · Accepted Answer

When a rent ceiling is imposed below the equilibrium rent, the quantity of housing supplied will be less than the quantity of housing demanded. This will create a shortage in the market, and those who are able to secure rent-controlled housing will be less likely to move out of their apartments, leading to a reduced turnover rate in the rental market. A black market may emerge from landlords who charge a premium rent to desperate renters who are unable to find rent-controlled housing. Potential suppliers will be in a long waiting list to supply the rent-controlled housing due to the low supply. Therefore, both A and B are correct.

Which One of the Following Is Likely to Be the Outcome