Evaluating a Policy Response to a Housing Demand Shock
A city's rental housing market is initially in a state where the quantity of apartments demanded equals the quantity supplied. A sudden, large increase in demand occurs due to a new factory opening. Before the market price has time to adjust, a city official proposes, 'We must immediately freeze rents at their current level to prevent sharp price increases and keep housing affordable.' Critically evaluate this proposal. Your response should first explain the immediate state of the market at the original price after the demand increase, and then assess the likely positive and negative consequences of implementing the rent freeze in this scenario.
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CORE Econ
Introduction to Microeconomics Course
The Economy 2.0 Microeconomics @ CORE Econ
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