Other Things Being Equal, the Increase in Rents That Occurs

question 137

Multiple Choice

Other things being equal, the increase in rents that occurs after rent controls are abolished is smaller when:

• A) the own price elasticity of demand for rental homes is price inelastic.
• B) the own price elasticity of demand for rental homes is price elastic.
• C) the own price elasticity of demand for rental homes has unitary price elasticity.
• D) rented homes and owned homes are complements.
• E) rented homes and owned homes are substitutes.

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Definitions:

Supply and Demand

The fundamental economic model that describes the interaction between the availability of a particular product and the desire for that product, determining its price.

Deadweight Loss

A loss of economic efficiency that occurs when the optimal level of supply and demand is not achieved.

Supply Elasticities

Measures the responsiveness of the quantity supplied of a good to a change in its price.

Excise Tax

A tax imposed on specific goods, services, or transactions, often used to discourage consumption of certain products or to raise government revenue.