Question

In an unregulated market, a sudden decrease in the stock of housing would likely evoke what kind of market response?

A) higher quantity supplied
B) higher rental rates
C) persistent surpluses
D) more favourable lease terms for tenants
E) lower rental rates

Answer 1

In an unregulated market, a sudden decrease in the stock of housing would likely lead to higher rental rates.

Step-by-step explanation:

In an unregulated market, a sudden decrease in the stock of housing would likely evoke lower rental rates.

When the stock of housing decreases in an unregulated market, the supply of available houses goes down. As a result, the demand for the remaining houses increases, which puts upward pressure on rental rates. To balance the increased demand and limited supply, landlords may increase rental rates.

Therefore, in an unregulated market, a sudden decrease in the stock of housing would lead to higher rental rates as landlords seek to capitalize on the increased demand.