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RENT CONTROLS

A. If a city decides to use rent controls (a price ceiling) to “solve” the problem of high rent for the poor. State how each of the following will be affected. (compare these to the pre-rent control situation)

a. number of low rent apartments (quantity)

b. number of homeless

c. monthly rents (price) for the poor that find housing

d. black market payments for rent controlled apartments

B. Now the city sees that rent controls produces a shortage of rental apartments. Suppose a city facing such a shortage of rental apartments eliminates rent controls. State whether the following will increase, decrease, or not change: (assume short run)

a. monthly rent (price of housing)

b. number of apartment (quantity of housing)

c. demand for housing

d. supply of housing

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