GK
BUSINESS ECONOMICS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The demand and supply will increase.
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The increased supply will create a surplus.
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The increased demand will create a shortage.
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The demand will decrease and the supply will increase.
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Detailed explanation-1: -If a local government sets an apartment rent control price below the equilibrium, what is the MOST LIKELY outcome? The increased demand will create a shortage. What is the role of consumers in determining what is produced in a market economy? Consumers use their buying power to determine goods produced.
Detailed explanation-2: -When a rent ceiling is set below the equilibrium price there is inefficiency in the underproduction of services. Additionally, the quantity demanded heightens above the supplied quantity. The occurrence of an increment in demand and a decrease in supply breeds shortages or excesses in demand.
Detailed explanation-3: -Rent controls force landlords to price apartments below the equilibrium price level. An immediate effect is a shortage (excess demand) of apartments, because the quantity of apartments demanded is greater than the quantity supplied at the regulated price.
Detailed explanation-4: -As in the case of other price ceilings, rent control causes shortages, diminution in the quality of the product, and queues.
Detailed explanation-5: -Rent controls compel landlords to price their houses below the equilibrium price level and reduce the prices of rental housing. It is usually a form of price ceiling placed on rent and rental housing. In the rent-controlled housing market, the rents paid decrease thereby reducing the number or quantity of houses.