In the housing market, supply and demand are

Question

BlackTom AI · Accepted Answer

To analyze the statement about housing market dynamics, we start by recalling the core idea: elasticity measures how responsive quantity supplied or demanded is to a change in price over a given time.
Option presented: 'a. more elastic in the long run than in the short run, and so rent control leads to a larger shortage of apartments in the long run than in the short run.'
First, consider supply: in the short run, builders and landlords cannot easily alter the number of units or their locations. In the long run, new housing can be built and conversions can occur, increasing the responsiveness of supply to price changes. This means supply is more elastic in the long run.
Next, consider demand: over time, buyers can substitute between housing types, move to different areas, or adjust preferences in response to price signals. Demand tends to become more elastic in the long run as consumers have more alternatives and time to adjust.
Now, rent control is a price ceiling intended to keep rents below market levels. When elasticity is higher (in the long run), the quantity supplied and demanded respond more to the price control, typically widening the shortage as quantity demanded rises and quantity supplied falls or cannot adjust quickly enough.
Putting these pieces together: because both sides are more elastic in the long run, the gap between quantity demanded and quantity supplied under rent control tends to be larger in the long run, producing a larger shortage of apartments than in the short run.
If you consider potential objections, in the short run the shortage can still occur, but the limited ability to adjust supply and demand means the shortage is smaller than in the long run where adjustments accumulate. The statement aligns with standard microeconomic theory on price controls and elasticity over time.
In sum, the claim that supply and demand are more elastic in the long run, and that rent control leads to a larger shortage of apartments in the long run than in the short run, is consistent with the principle that greater price responsiveness over time amplifies the effects of binding price ceilings.

In the housing market, supply and demand areSingle choice

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