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.

Question

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.

Quizplus · Accepted Answer

Rent controls create a price ceiling below the market equilibrium price, leading to excess demand or shortage. If the supply curve for housing has a normal positive slope, rent controls will exacerbate the shortage because suppliers will reduce the quantity of housing supplied since the rent they can charge is below their cost of production. Rent controls can also decrease the quality of available housing since suppliers have less incentive to maintain and improve their properties. Therefore, C is the best answer.

If the Supply Curve for Housing Has the Normal Positive