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    Effect of price ceiling on appartment supply and demand

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    What happens in the market for apartments when the government institutes a price ceiling that is lower than the market price? What could be some actions taken by renters and landlords when dealing with a price ceiling?

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    The market price reflects the point where the quantity of apartments demanded will equal the quantity supplied. Lower prices will attract additional renters, but at the same time cause landlords to rent fewer, as less profit can be obtained from renting. So, a price lower than equilibrium will result in a shortage. Shortages cause prices to increase, and if the government does not permit a legal price increase, ...

    Solution Summary

    This solution discusses the effect a price ceiling would have on an apartment's supply and demand.