New housing takes some time to build, so rent control creates larger shortages in the:
A) long run than in the short run because short-run supply is more elastic.
B) long run than in the short run because long-run supply is more elastic.
C) short run than in the long run because short-run supply is more elastic.
D) short run than in the long run because long-run supply is more elastic.

Question

Quizplus · Accepted Answer

In the short run, supply is more inelastic as the production of new housing takes time. Thus, rent control creates smaller shortages in the short-run. However, in the long run, as developers have time to adjust to the new market conditions, the supply of new housing becomes more elastic, and rent control leads to larger shortages in the long run as a result.

New Housing Takes Some Time to Build, So Rent Control