Rent control becomes a politically hot topic when rents begin to rise rapidly. Everyone needs an affordable

place to live. Perhaps a change in tastes makes a certain suburb or town a more popular place to live. Perhaps

locally-based businesses expand, bringing higher incomes and more people into the area. Such changes can
cause a change in the demand for rental housing, as Figure 3.21 illustrates. The original equilibrium (E0) lies at
the intersection of supply curve S0 and demand curve D0, corresponding to an equilibrium price of $500 and
an equilibrium quantity of 15,000 units of rental housing. The effect of greater income or a change in tastes is
to shift the demand curve for rental housing to the right, as the data in Table 3.7 shows and the shift from D0 to
D1 on the graph. In this market, at the new equilibrium E1, the price of a rental unit would rise to $600 and the
equilibrium quantity would increase to 17,000 units.
72 3 • Demand and Supply
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