In the presence of binding rent controls,the shortage of housing is smaller
A)the higher is the elasticity of demand for housing.
B)the lower is the elasticity of supply of housing.
C)the longer is the length of time the rent controls are in place.
D)the greater is the difference between the equilibrium price and the rent-controlled price.
E)the more elastic is the long-run supply of housing.

Question

Quizplus · Accepted Answer

Rent controls limit the maximum rent that landlords can charge, causing a decrease in the quantity of housing supplied in the market because many landlords find it unprofitable to rent their properties at the controlled price. As a result, the shortage of housing is smaller, and the degree of this effect depends on the elasticity of supply of housing. The lower the elasticity of supply, the more significant the decrease in housing supply and the smaller the housing shortage.

In the Presence of Binding Rent Controls,the Shortage of Housing