The above figure depicts an equilibrium and an effect of price ceiling (maximum rent). The market demand for apartments is depicted by the D1D1 curve and the supply of apartments is depicted by S1S1. The equilibrium price determined is R and the equilibrium quantity is q.
If the government steps in and imposes rent ceiling (maximum rent) equivalent to RG, then at this rent, there will be an excess demand. The quantity of apartments demanded will be qd. Whereas, the quantity of apartments supplied is qs. So, there exists an excess demand equivalent to qd - qs. At the rate RG, common people can afford apartments to live in, which earlier they were not able to. However, besides this positive effect of imposition of maximum rent, it might happen that some landlords indulge in the practice of ***** marketing and offer apartments for rent at comparatively higher price.
