FIGURE 3.21 A Price Ceiling Example—Rent Control The original intersection of demand and supply occurs at E0. If
demand shifts from D0 to D1, the new equilibrium would be at E1—unless a price ceiling prevents the price from
rising. If the price is not permitted to rise, the quantity supplied remains at 15,000. However, after the change in

demand, the quantity demanded rises to 19,000, resulting in a shortage.

Price Original Quantity Supplied Original Quantity Demanded New Quantity Demanded

$400 12,000

$500 15,000

$600 17,000

$700 19,000

$800 20,000

TABLE 3.7 Rent Control

18,000

15,000

13,000

11,000

10,000

23,000

19,000

17,000

15,000

14,000

Suppose that a city government passes a rent control law to keep the price at the original equilibrium of $500

for a typical apartment. In Figure 3.21, the horizontal line at the price of $500 shows the legally fixed

maximum price set by the rent control law. However, the underlying forces that shifted the demand curve to
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