What is a likely outcome when subsidies are increased if the supply of housing is perfectly inelastic?

When subsidies for housing are increased in a market where the supply of housing is perfectly inelastic, one significant outcome is that the price of housing rises. This is because a perfectly inelastic supply means that the quantity of housing cannot change regardless of price fluctuations—essentially, the amount of available housing remains constant regardless of demand changes or price adjustments.

When subsidies are introduced, they effectively increase consumer purchasing power, allowing more buyers to enter the market or spend more than they would otherwise. As demand for housing increases due to these subsidies, sellers can raise prices without fear of losing sales, because the quantity supplied cannot increase to meet this heightened demand. Thus, the result is an upward pressure on prices in the housing market.

In a market with perfectly inelastic supply, the increased demand driven by subsidies leads directly to higher prices, further demonstrating the interplay between demand and pricing in the context of fixed supply.