Question
A mayor wants to help renters in her city. She con- siders two policies that will benefit renters equally. One policy is rent control, which
A mayor wants to help renters in her city. She con- siders two policies that will benefit renters equally. One policy is rent control, which places a price ceil- ing, p, on rents. The other is a government hous- ing subsidy of s dollars per month that lowers the amount renters pay (to p). Who benefits and who loses from these policies? Compare the two poli- cies' effects on the quantity of housing consumed, consumer surplus, producer surplus, government expenditure, and deadweight loss. Does the com- parison of deadweight loss depend on the elastici- ties of supply and demand?
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