Suppose That a Large City Is Investigating the Elimination of Rent

Multiple Choice

Suppose that a large city is investigating the elimination of rent controls on housing at a time when the vacancy rate is extremely low-only 1 percent of all apartments in the city are vacant.Which of the following is most likely to occur if rent controls are eliminated?

A) An increase in the demand for housing, followed by a decrease in the supply of housing.
B) An increase in rents, perhaps followed later by an increase in the supply of housing.
C) A decrease in rents and a decrease in the supply of housing.
D) No change in rents, since price controls are usually set where supply and demand intersect.
E) A decrease in the demand for housing, followed by a decrease in the supply of housing.