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Price controls, rent and gasoline

Please address the following questions below in detail and site any references used in the return response:
1. Using the principles of economic reasoning, discuss the probable consequences of the rent controls.
2. What do the laws of supply and demand predict would be the result of an immediate removal of rent control in terms of the price of rental housing and the quantity available?
3. If you consider a product like gasoline, would you favor price control so that you pay less than the current price at the pump, $1.00 less for example? Why or why not?
4. If economists are right about the generally negative effects of price controls, why do you think they remain in place in some cases? Do you think they allocate scarce resources efficiently? What would be some alternative policy measure for fair housing?

Solution Preview

1. One example of rent control is only allowing a certain increase of rent per year in a house. So, if John was paying 900/month for his apartment, next year his rent, or that of another tenant, could only be say 2% more. If that is below the market price for the apartment, what you have, basically, is a price ceiling. Under those circumstances, the demand for apartments would be higher than the available supply and there will be a housing shortage. Furthermore, because a decision to buy a house is dependent on the return one can get from it, one can expect that the price of houses would be lower than without rent controls and as a result, fewer houses would ...

Solution Summary

Answers the questions:

Please address the following questions below in detail and site any references used in the return response:
1. Using the principles of economic reasoning, discuss the probable consequences of the rent controls.
2. What do the laws of supply and demand predict would be the result of an immediate removal of rent control in terms of the price of rental housing and the quantity available?
3. If you consider a product like gasoline, would you favor price control so that you pay less than the current price at the pump, $1.00 less for example? Why or why not?
4. If economists are right about the generally negative effects of price controls, why do you think they remain in place in some cases? Do you think they allocate scarce resources efficiently? What would be some alternative policy measure for fair housing?

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