The government imposes a maximum price on apartments that is below the equilibrium price. You accurately predict that
A) the law will have no economic impact.
B) the law will create a surplus of apartments.
C) renters will find that landlords start offering to furnish the apartments.
D) landlords are less likely to do routine maintenance work in the apartments.

Question

Quizplus · Accepted Answer

When a government imposes a maximum price on apartments that is below the equilibrium price, it creates a price ceiling. This often leads to a shortage rather than a surplus because the price is too low to encourage landlords to supply the market demand. Landlords, facing lower rental income, may cut costs by reducing expenditures on routine maintenance work, leading to a decline in the quality of the apartments.

The Government Imposes a Maximum Price on Apartments That Is