Question

(a) Use the market diagram to illustrate the imposition of a rent ceiling above the market equilibrium price. What can you explain from the graph?

(b) The equilibrium price in the housing market is very high. What do you think will happen if the government imposes a very high price ceiling that is below but very close to the equilibrium price on the housing market, because a politician owns housing units in certain areas? How does that affect the poor and the market for housing?

(c) Can you identify any losses or gains? Explain.

Answer 1

ANSWER 1ST - PRICE CEILING: RENT CONTROL

FIRST WE HAVE TO KNOW ABOUT WHAT IS PRICE CEILING OR RENT CEILING?

PRICE CEILING IS A DIRECT INTERVENTION BY GOVT TO CONTROL RISING IN PRICE AND TO SAVE INTEREST OF CONSUMERS. RENT CONTROL IS ALSO A CONTROL OF GOVT. IN WHICH GOVT,FIXES A FIXED AMOUNT OF RENT THAT IS SATISFACTORY TO TENANTS.

MARKET DIAGRAM OF INCREASE IN RENT CEILING AND DECREASE IN RENT CEILING'

AS WE CAN SEE ABOVE FIGURE OF RENT CONTROL IN WHICH INCREASE IN RENT CEILING ABOVE EQUILIBRIUM PRICE HAS NO EFFECT ON HOUSING BUT DECREASE IN RENT CONTROL PUTS AFFECT ON LANDLORDS AND HOUSING

ANSWER 2ND

IF GOVT. IMPOSES A HIGH PRICE CEILING THEN IT WILL AFFECT LANDLORDS OF HOUSE AND TENANTS BOTH

EVERY HOUSE OWNER TENDS TO INCREASE RENT WITH FIXED INTEREST IN FIXED TIME PERIOD BECAUSE HE SPENDS  ON HOUSING FACILITY, MAINTAINENCE, AND NEW FUNITURES AND NEW APPLIANCES BUT IF DUE TO POLITICAL PRESSURE LANDLORDS HAVE TO TAKE RENT AMOUNT FROM TENANTS A THAT IS NOT SATISFACTORY AND THAT AMOUNT NOT GIVING ANY PROFIT TO OWNER THEN HE IS NOT EXCITED TO INVEST IN NEW BUILDINGS FORMATION BECAUSE HE IS NOT SO ABLE TO INVEST MORE WITH SUCH A LOW INCOME THAT LEADS TO SHORTAGE OF HOUSES AND BUILDINGS AND ALSO DECRASES A VALUE OF HOUSE AND BUILDINGS AND TENANTS WILL HAVE NOT GIVEN ANY FACILITUY AND HAVE TO LIVE WITH LOW MAINTAINENCE HOUSE THAT DIRECTLY AFFECTS HOUSING NARKETS AND POOR

This, of course, leads to new problems, such as a decline in the building of new housing, but governments often do not account for the future. Because politicians serve limited terms, they're more apt to solve current problems and not worry so much about future problems. As they say, politicians like to kick the can down the road, leading to future problems. But preventing future problems does not help politicians get re-elected. Thus, price controls are a political expediency to solve current social problems that will garner support, at least temporarily, for politicians managing the problem, even though price controls are often detrimental to the economy in the long run.

ANSWER 3RD

THE PRICE CEILING HAS BOTH ADVANTAGES AND DISADVANTAGES FOR BOTH LANDLORDS AND TENANTS

ADVANTAGES OF PRICE CEILING

1ST TENANTS ARE ABLE TO LIVE IN SUCH A SATISFACTORY RENT

2ND TENANTS ARE SO EXCITED FOR LEASE RENEWAL

  DISADVANTAGES

  1ST- NO INCENTIVE TO UPGRADE HOME

2ND- PRICES FALL BELOW MARKET

3RD- OLDER BUILDINGS

4TH- DISCOURAGES BUILDING

EXPLANATION

PRICE CEILING GIVES ADVANTAGE TO TENANTS IN THE TERM OF RENT AMOUNT ONLY BUT TENANTS IN FUTURE NOT ABLE TO GET HIGH FACILITY FOR ITS RENT ACCOMODATION BECAUSE DUE TO LOW INCOME LANDLORDS WILL NOT SPEND SO MUCH AMOUNT IN MAINTAINENCE AND FURNITURE AND LANDLORDS ARE ALSO DISCOURAGED TO INVEST IN NEW BUILDINGS DUE TO LOW INCOME RECEIVED SO IN MY VIEW IT IS A TERRIBLE IDEA OF RENT CONTROL BECAUSE FOR GIVING SOMEONE PROFIT GOVT,FORGOT FOR OTHERS.