Which of the following is one of the functions of rental prices?
A) to redistribute income from landlords to renters
B) to redistribute income from renters to landlords
C) to signal to the local government when taxes on rental units should be increased
D) to ration the use of existing housing for current consumers

Question

Quizplus · Accepted Answer

The function of rental prices is to ration the use of existing housing for current consumers. Rental prices determine who is willing and able to pay for a particular unit, and therefore allocate the limited supply of housing to those who value it the most. Choices A and B are incorrect as rental prices do not involve income redistribution, but rather reflect the market value of the property. Choice C is also incorrect as rental prices do not signal to the government to increase taxes, rather taxes on rental units are determined by policy decisions made by the government.

Which of the Following Is One of the Functions of Rental