Question Part B

B. To remain competitive in the post-COVID-19 market for international students, the government of the Australian Capital Territory (ACT) decided to make accommodation more affordable for students by imposing control on weekly rent for an apartment. Suppose the average weekly market-clearing rent for an apartment had been $450 and that rents were expected to increase to $700 per week during the next academic year. The city council limits rents to their current $450-per-week level. i. Draw a supply and demand graph to illustrate what will happen to the rental price of an apartment after the imposition of rent controls, assuming no change in the supply of rental apartments in the short run. Correctly label your diagram (3 marks). ii. Do you think this policy will benefit all students? Why or why not? (4 marks)