The city council of a small college town decides to regulate rents in order to reduce student living expenses

Marketing Jan 09, 2021

The city council 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 one-bedroom apartment had been $700 per month and that rents were expected to increase to $900 within a year because of the expectation that the total number of enrolled students in the college increase. The city council limits rents to their current $700-per-month level.

a. Draw a supply and demand graph to illustrate what will happen to the rental price of an apartment after the imposition of rent controls.

b. Is this policy will benefit all students? Why or why not?

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