18.11 Policy Application: Rent Control: A portion of the housing market in New York City (and many other cities in the world) is regulated through a policy known as rent control. In essence, this policy puts a price ceiling (below the equilibrium price) on the amount of rent that landlords can charge in the apartment buildings affected by the policy.

A. Assume for simplicity that tastes are quasilinear in housing.

a. Draw a supply and demand graph with apartments on the horizontal axis and rents (i.e., the monthly price of apartments) on the vertical. Illustrate the “disequilibrium shortage” that would emerge when renters believe they can actually rent an apartment at the rent-controlled price.