Suppose the demand for rental apartments decreased substantially. We would expect to observe

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When the demand for rental apartments decreases, we would expect landlords to lower their rents in the short run in order to attract tenants. However, in the long run, landlords might start reducing the quantity supplied of rental apartments as the profits would decrease with lower demand. Therefore, a small decrease in quantity supplied and significantly lower rents in the short run, and quantity supplied to decrease much more in the long run is the best choice. Option A is incorrect because a sharp reduction in quantity supplied in the short run and a larger decrease in the long run is less likely to happen. Option B is incorrect because landlords would not increase the quantity supplied if there is a decrease in demand. Option D is incorrect because landlords might reduce the quantity supplied and decrease the rent as well, but the reduction in rent might not be significantly larger in the long run.

Suppose the Demand for Rental Apartments Decreased Substantially