Stuart Tells His Student Government Representative at His College to Propose

Multiple Choice

Stuart tells his student government representative at his college to propose rent controls on local rental housing as a way to help students afford rental housing. Maria disagrees with Stuart, saying rent controls will make students worse off. Who is correct and why?Economic theory suggests that this policy would harm students as a whole despite the fact that some students who are able to find housing at the reduced price would benefit. Which of the following are some of the offsetting secondary effects of the rent controls that would work to the disadvantage of students?

A) Stuart is correct. All students will be better off with a lower price of rental housing.
B) Maria is correct. All students will be worse off with a shortage of rental housing.
C) Neither are correct. Imposing rent controls will have no effect on the rental housing market.
D) Both are correct in part. Rent controls will be better for the students who are able to find housing at the reduced price but worse for students as a whole because there will be a shortage of rental housing, a lower future supply, and the quality will deteriorate.