If the supply curve for housing has the normal positive slope, rent controls are likely to:
A)increase the quantity of available housing.
B)improve the quality of available housing.
C)create a larger shortage than if the supply curve were vertical.
D)help low-income families find suitable housing.
E)increase the demand for housing.

Question

Quizplus · Accepted Answer

If the supply curve for housing has a normal positive slope, rent controls will create a shortage of housing because they prevent the market from reaching equilibrium. With a price ceiling, the quantity of housing supplied will be less than the quantity demanded, leading to a shortage. If the supply curve were vertical, there would be no change in quantity supplied and the shortage would be smaller. Rent controls do not necessarily increase the quantity or improve the quality of available housing, and they may discourage construction and investment, leading to a further decrease in the quantity and quality of available housing. Rent controls may help low-income families find housing, but they may also reduce mobility and discourage investment in affordable housing by making it less profitable. Rent controls do not increase the demand for housing, as demand is determined by the willingness and ability of consumers to pay for housing at different prices.

If the Supply Curve for Housing Has the Normal Positive