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Suppose a city facing a shortage of rental apartments eliminates rent controls. Which of the following is most likely to occur?
A. a decrease in rents and a decrease in the number of apartment units supplied.
B. an increase in rents and an increase in the number of apartment units supplied.
C. a decrease in the demand for apartments and an increase in the number of apartment units supplied.
D. an increase in the demand for apartments and a decrease in the number of apartment units supplied.

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Answer:

The correct answer is (B)

Explanation:

A shortage of rental apartments will lead to an increase in the rents. There is a shortage of apartments that has eliminated the rent control. Overall, the owners will increase the rents of the apartments and as a result the demand will decrease.  A decrease in demand will lead to an increase in the supply of apartments.

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