The shortage that results from rent control will be smaller

Question

Quizplus · Accepted Answer

In the short run, landlords cannot easily adjust the supply of housing, so the shortage resulting from rent control will likely be smaller. However, in the long run, landlords may decide to convert rental units to other uses or not build new rental units, which will increase the shortage. Additionally, when demand is more inelastic (less responsive to changes in price), the shortage resulting from rent control will be larger, whereas when demand is more elastic, the shortage will be smaller. Therefore, choices (B) and (C) both contribute to a smaller shortage resulting from rent control.

The Shortage That Results from Rent Control Will Be Smaller