Question
A large city in the Eastern US is plagued with higher and higher rents. The average rent in the largest rental neighborhood is $2,000 per
A large city in the Eastern US is plagued with higher and higher rents. The average rent in the largest rental neighborhood is $2,000 per month. This neighborhood largely serves new residents to the city, mostly immigrants. Most of these residents cannot afford these rents, so the local government has determined that it will initiate a “price ceiling” or “rent control ceiling” at $1500. In other words, there are to be no rents above $1500 in this neighborhood.
Given this information, answer the following questions:
a. Explain the likely market effects of this rent control strategy, using illustrative supply and demand curves with the numbers mentioned above.
b. Do you anticipate a surplus or shortage of rental housing in this neighborhood? Explain your response.
c. Longer term, will landlords be motivated to maintain quality housing in this neighborhood?
d. What may happen to the quality of the entire neighborhood over the long term if rent control is maintained for years to come? Explain.
Step by Step Solution
3.41 Rating (157 Votes )
There are 3 Steps involved in it
Step: 1
a The supply of houses is relatively inelastic in the short run because landlords have a fixed amoun...Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Document Format ( 2 attachments)
6360221b3a308_233587.pdf
180 KBs PDF File
6360221b3a308_233587.docx
120 KBs Word File
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started