Question

In: Economics

What have you learned so far about what determines prices such as the rent for an...

  • What have you learned so far about what determines prices such as the rent for an apartment?
  • If people cannot afford rent, what are they to do?
  • What are the consequences of controlling rent and for not controlling it?
  • Is the current system fair?

Solutions

Expert Solution

Ans

Rent means the regular payment that the tenant makes to the landlord for the use of the property.

The various determinants of prices such as rent of the apartment are:

1. Household Income.

The purchasing power of households depends upon the household income from work which comes from firms. The household income and the rent has a positive relationship i.e. the increase in household income increases the spending capacity of the household and thus it can pay the high rents.

2. Inflation.

Inflation means the increase in the prices of goods and services . Inflation leads to increase in the rental value as the property owners increase the rental inorder to maintain their real rental income.

3.Demographic Changes.

Demographic changes indirectly influences the shop rental value in the long run. Eg: Higher the education level in the society the higher the income will be and so it will lead to higher purchasing power and thus increases the spending power of the household.

If the people cannot afford rent then they should opt the following steps:

1. Discuss with the Landlord.

If the people cannot afford the rent then they should discuss it with the landlord inorder to modify the rent or shall increase the time for making the payment of rent.

2. Re.evaluating the budget.

The people shall re.evaluate their budget i.e. analyzing the needs and wants according to its priority and how to meet it and how the unnecessary expenses can be controlled inorder to sufficient money for rental payments.

3. Seek Financial help.

The people who cannot afford the rent can seek financial help from others like friends , relatives or can take a loan from banks.

The various consequences of controlling a rent are:

1.It enables moderate income families to live fear without fear of rent hike.

2.It safeguards the people from faster increase of rent than their incomes.

The various consequences of not controlling rent are:

1. It leads to undesirable increase in the rent if left unregulated.

2. The people are unsafe due to the hike of rent anytime.

The current system of renting involves a agreement between the tenant and the landlord where the tenant makes the regular payment of rent to the landlord for the use of property owned by the other this agreement defines the various rights and responsibilities of tenants and landlord towards the property . The current system of rent is fair enough because it is regulated by the rent control which safeguard the tenants from the unusual risk of rent hike .


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