Answer to Question #53256 in Microeconomics for Akanksha

Question

The Municipal Corporation of a small college town decides to regulate rents in order to reduce student living expenses. Suppose the average annual market-clearing rent for a two bedroom apartment had been Rs.10000 per month, and rents were expected to increase to Rs.15000 within a year. The Municipal Corporation limits rents to their current Rs.10000-per-month level. Draw a supply and demand graph to illustrate what will happen to the rental price of an apartment after the imposition of rent controls. Do you think this policy will benefit students? Why or why not?