Suppose the equilibrium rent for apartments in Vancouver is $1 600.If the city of Vancouver imposes a price ceiling of $1 200,there will be a(n):
A) increase in producer surplus for each landlord.
B) surplus of new apartments in Vancouver.
C) increase in consumer surplus for Vancouver residents who can find apartments for $1 200.
D) increase in total surplus.

Question

Quizplus · Accepted Answer

With a price ceiling of $1 200, the quantity of apartments supplied will decrease and the quantity of apartments demanded will increase, leading to a shortage of apartments. However, for those consumers who are able to secure one of the scarce apartments at the lower price, they will experience an increase in consumer surplus. There will be a decrease in producer surplus for each landlord as they are forced to rent their units at a lower price, but there will be no surplus of new apartments in Vancouver. Overall, there is a potential decrease in total surplus due to the inefficiencies caused by the price ceiling.

Suppose the Equilibrium Rent for Apartments in Vancouver Is $1