5. In which case would you expect rental apartments to be of higher quality? A city...

5. In which case would you expect rental apartments to be of higher quality? A city that has a binding price ceiling or a city that has a binding price floor? Explain your answer.

6. Graph and explain Ubers surge pricing policy. (google it). Is this fair?

Expert Solution

Rental apartments will be of higher quality when there is price floor. Price floor is fixing the minimum price. If rent flooring is done in the housing market then it will ensure some minimum amount to the landlords. Rent will be set above the market equilibrium in the economy. This will make landlords better off and landlords will be willing to rent more apartments and improve the quality of existing apartments in order to rent more apartments as it will lead to higher profits in future. This will create excess supply of apartments to rent in the market. On the other hand, price ceiling is done to protect the interest of buyers as price is fixed below the equilibrium price. If rent ceiling is done in the housing market then sellers will not be willing to rent apartments and will not improve the quality of existing apartments. So, price flooring would improve the quality of rental apartments.

Rahul Sunny answered 2 hours ago

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