Question

Figure 11.22 illustrates the rental housing market. 1100 News Housing rent (6) Controle 8.000 12.000 Number of tenances Initially, the market clears at €500 with 8,000 tenancies. Then, there is an outward shift in the demand curve, as shown in the diagram. In response, the city authority imposes a rent ceiling of €500 and prohibits subletting. Based on this information, which of the following statements are correct? [Select all correct answers). Excess demand could be eliminated in the long run by building more houses. The market would clear at €1,100. Given the new demand curve, consumers would be willing to pay €1,100 for the amount of tenancies available. There are 4.000 potential tenants who are left unhoused,

Answer 1

True statements-

●. There are 4,000 potential tenants who are left unhoused.

●. Excess demand could be eliminated in the long run by building more houses.

Reason- At the rent of $500, 12000 houses are demanded and 8000 houses are supplied. So excess demand is equal to 4000.

If the supply curve shifts to the right in the lond run this excess demand can be eliminated.

Without rent ceiling, Market clears at $830, this is what the consumers would be willing to pay.