The deadweight loss from a rent ceiling below the equilibrium rent is smallest when the supply of housing is
A) perfectly elastic.
B) elastic but not perfectly elastic.
C) unit elastic.
D) inelastic but not perfectly inelastic.
E) perfectly inelastic.

Question

Quizplus · Accepted Answer

The deadweight loss from a rent ceiling is smallest when the supply of housing is perfectly inelastic. This means that the quantity supplied of housing does not respond at all to changes in the rent. In this case, the rent ceiling only affects the distribution of the limited amount of housing among tenants, without reducing the overall quantity supplied, which minimizes the loss of welfare relative to other levels of supply elasticity.

The Deadweight Loss from a Rent Ceiling Below the Equilibrium