Question

Suppose that college students in your town persuaded the town council to enact a law setting the maximum price for rental housing at $400 per month.

This will hurt college students who rent housing for the following reasons: Check all that apply.

a The quality of housing will deteriorate, making it difficult for students to find quality housing.

b The price ceiling will create a housing shortage.

c The quality of housing will improve, benefiting tenants.

d Over time, more affordable housing will be created.

Answer 1

The answer is option a and b- The quality of housing will deteriorate, making it difficult for students to find quality housing.The price ceiling will create a housing shortage

The price ceiling lowers the volume of commodities arriving from the equilibrium number, allowing exchange profits (consumer and product surplus) to decrease. Landlords can channel money away from constructing new residential housing projects into other, more lucrative locations at the lower price. As a consequence the scarcity of the drug will deteriorate with time. In the face of a price ceiling, sellers will be using quality reductions as a way to raise prices. Instead of the scarcity created by the government, more customers would buy the good of lower quality rather than without it.