Rent controls tend to cause persistent imbalances in the market for housing because
A) Quantity demanded exceeds quantity supplied but price cannot rise to remove the shortage.
B) Quantity demanded exceeds quantity supplied but price cannot fall to remove the surplus.
C) Quantity supplied exceeds quantity demanded but price cannot rise to remove the shortage.
D) Quantity supplied exceeds quantity demanded but price cannot fall to remove the surplus.

Question

Quizplus · Accepted Answer

Rent controls set a maximum price for rent, which is typically below the equilibrium price. This leads to a situation where the quantity demanded exceeds the quantity supplied, creating a shortage. However, the price cannot rise to eliminate this shortage due to the imposed rent control.

Rent Controls Tend to Cause Persistent Imbalances in the Market