Suppose that the City of Detroit enacts a rent control law that reduces all curr

Question

Suppose that the City of Detroit enacts a rent control law that reduces all current rents by 10%. Give the

short run effects of the law:

A. If the Detroit apartment rental market is competitive.

B. If the Detroit apartment rental market is controlled by United Landlords,a single firm that owns all of the apartments

in Detroit and the relevant surrounding areas.

In both cases, be sure to EXPLAIN the effects of the law on the rental price, and on the quantity of apartments rented. Also

explain whether there is a shortage of apartments, a surplus, or neither.

Explanation / Answer

in case A

the quantity of houses rented would go up as there is a fall in price. There woulod be shortage of houses.

in case B

the quantity of houses rented would go down due to monploly effect. Neither there would be shortage nor there will be surplus.

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