Concept: A maximum price or rent ceiling is a government-imposed limit set below the market equilibrium to make housing affordable.
Explanation:Rent is the price paid for accommodation.
When rent is too high, the government can intervene by fixing a maximum price.
This maximum price must be set below the equilibrium rent to be effective.
At the equilibrium price, the market already clears, so the government would not reduce cost.
Setting rent above the equilibrium price would raise the cost, not reduce it.
Setting rent at the prevailing or equilibrium rate would only maintain the current cost.
Therefore, the government lowers accommodation cost by fixing rent below the market equilibrium price.
However, this creates excess demand or a housing shortage because
Qd>Qs.
Answer: D. below the equilibrium price