Answer to Question #133543 in Economics of Enterprise for Student88

Question

Some cities impose rent control laws, which are price controls or limits on the price of rental
accommodations (apartments, houses, and mobile homes). New York City alone had over two
million rent-controlled apartments in the early 1950s, but only about 27,000 as of 2014. Show
the effect of a rent control law on the equilibrium rental price and the quantity of N.Y. apartments.
Show the amount of excess demand on your supply-and-demand diagram.

Answer 1

A rent control law set the price below the equilibrium rental price, as a result the supply decreases over time, and the equilibrium quantity of N.Y. apartments decreases too.

The excess demand occurs as a result of price ceiling. It can be shown as the difference between the quantity demanded and supplied on supply-and-demand diagram.