Question

In: Economics

Price ceilings, such as rent controls, will lead to _______ if they are binding. Group of...

Price ceilings, such as rent controls, will lead to _______ if they are binding.

Group of answer choices

an equitable distribution of housing

surpluses

shortages

more apartments being built

Solutions

Expert Solution

Answer : (c) shortages

Here DD' is the demand curve and SS' id the supply curve. P' and Q' are the autarkic market clearing price and quantity respectively. Now when a price ceiling is intoduced, the price goes down to P". Here the supply will be 0Q" and the demand will be 0Q"'.There is excess demand. So there will be a shortage of apartments by Q"Q'" units.

Rahul Sunny answered 2 years ago
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