Rent controls cause:

Question

Quizplus · Accepted Answer

Rent controls set a maximum price that landlords can charge for rent, which is typically below the market equilibrium price. This creates a shortage of rental properties, as some landlords are unable to cover their costs at the capped rent and thus withdraw from the market. The remaining rental properties are then typically allocated via non-price mechanisms, such as a waiting list or lottery system, which can lead to inefficiencies and unequal outcomes. However, tenants who are able to secure a rent-controlled unit benefit from a lower price, which leads to a transfer of producer surplus (i.e. the foregone profit that landlords would have earned if they were able to charge the market price) to consumer surplus (i.e. the additional utility that tenants receive from paying a lower price than they would have in an unregulated market). Thus, choice C is correct.

Rent Controls Cause