Figure: Short and Long Run Shortages Use the figure. At a rent-controlled price of $800, the short-run shortage of apartments is ________ and the long-run shortage is ________.
A) 12,000; 4,000
B) 4,000; 12,000
C) 8,000; 4,000
D) 8,000; 12,000

Question

Figure: Short and Long Run Shortages  Use the figure. At a rent-controlled price of $800, the short-run shortage of apartments is ________ and the long-run shortage is ________.
A) 12,000; 4,000 
B) 4,000; 12,000 
C) 8,000; 4,000 
D) 8,000; 12,000

Quizplus · Accepted Answer

At a rent-controlled price of $800, the quantity demanded of apartments (Qd) would be 16,000 and the quantity supplied (Qs) would be 4,000, resulting in a short-run shortage of 12,000 apartments (Qd - Qs = 16,000 - 4,000 = 12,000). In the long run, suppliers would have time to adjust their production levels and new suppliers would enter the market, increasing the quantity supplied. As a result, the long-run shortage would be larger than the short-run shortage, and would equal the difference between the quantity demanded and the new long-run equilibrium quantity supplied. The new equilibrium quantity supplied would be where the supply curve intersects the price ceiling line (PC). From the figure, this occurs at a quantity of 12,000 apartments. Therefore, the long-run shortage would be 16,000 - 12,000 = 4,000 apartments. Therefore, the correct answer is B.

Figure: Short and Long Run Shortages Use the Figure