A city sets a maximum legal rent of $800 per month for an apartment, even though the market-clearing rent without this rule would be $1,200. Four individuals are searching for an apartment: Anna (willing to pay up to $1,500), Ben (willing to pay up to $1,300), Carlos (willing to pay up to $900), and Diana (willing to pay up to $700). Which of the following outcomes best demonstrates the inefficient allocation of resources that can result from this policy?

Allocation Inefficiency in a Controlled Rental Market

In a rental market with a binding rent ceiling, the allocation of apartments is considered economically efficient as long as every available apartment is occupied by someone willing to pay at least the controlled rent.

Explaining Allocation Problems Under Rent Ceilings

A city's rental market has a market-clearing rent of €1,200 per month. The government imposes a rent ceiling of €800 per month. Consider the situations of the four individuals below. Match each individual to the economic description that best represents their outcome in this controlled market.

Evaluating the Allocative Effects of a Rent Ceiling

A binding rent ceiling creates an inefficient allocation of housing because the price is no longer able to serve as the primary ________ mechanism, meaning apartments may not go to the individuals who value them the most.

Identifying Potential Gains from Trade in a Rent-Controlled Market

A city government imposes a binding rent ceiling on its housing market, which was previously in equilibrium. Arrange the following events in the logical order they would occur, leading to an inefficient allocation of available apartments.

Quantifying Inefficiency in a Rent-Controlled Market