Question

what will be the resultant effects on supply and demand of a rented house if the ceiling is set above the market equilibrium rent ?

Answer 1

Due to the rent ceiling set above the market equilibrium price,the market for rented houses will experience excess supply.

Explanation:

The basic application of demand and supply can be used to understand the impact of rent ceiling in this case.If the rent ceiling is set above the equilibrium market price,the landlords will be attracted by the higher price and offer or supply more houses for rent.However,on the other hand,most of the renters or dwellers will not be willing stay in rented houses at such a high rent.This will create additional or excess supply of rented houses with no inmates or dwellers willing to stay in them.Hence,the supply of rented houses will be greater than its demand which ideally contributes to this excess supply in the market and create disequilibrium in the market.