Under the rent controlled measures implemented by the government there was PRICE CEILING introduced in Oman....

Under the rent controlled measures implemented by the government there was PRICE CEILING introduced in Oman. The tenants and landlords behave differently towards the low rental values for the buildings influencing the demand and supply side of houses in the long run market conditions.

Answer the questions:

Q1. Describe in your own words, the expected behaviour of TENANTS in the long run.

[4x1=4marks]

Q2. Analyse the behaviour of LANDLORDS while the low rents are observed in the market.

[4x1=4marks]

Q3. Do you think there would be SHORTAGE OR SURPLUS in long run and suggest your opinion to handle such a kind of situation? [2x1=2marks

Expert Solution

ANSWER 1

Due to a price ceiling on the rent which makes the rent less than the equilibrium price of rent there is long term effect on both the demand side and the supply side. Talking about the tenants or the demand side, low rents encourage people to find their own apartments rather than living with their parents or sharing apartments with roommates and induce more people to move into a city. Hence, there is an increase in the demand for rented apartments.

ANSWER 2

Talking about the behaviour of the Landlords, or the supply side, the effect of the reduced rent observed in the market in long run is that the landlords stop making new apartments for rental housing and fail to maintain the existing ones. Sometimes, the landlords convert the existing rental housing apartments into non rental apartments. As a result, there is a decline in the supply of rented apartments.

ANSWER 3

Price ceilings are enacted in an attempt to keep prices low for those who need the product. But when the market price is not allowed to rise to the equilibrium level, quantity demanded exceeds quantity supplied, and thus a shortage occurs. To handle this situation, the government can use subsidy to help the poor who need rental housing as they can get it at low rents, but at the same time also help the landlords or the providers as they would continue to provide the service without being demotivated because of loss of incentive.

Rahul Sunny answered 2 years ago

Under the rent controlled measures implemented by the government there was PRICE CEILING introduced in Oman....

Under the rent controlled measures implemented by the government there was PRICE CEILING introduced in Oman. The tenants and landlords behave differently towards the low rental values for the buildings influencing the demand and supply side of houses in the long run market conditions. Answer the questions: Q1. Describe in your own words, the expected behavior of TENANTS in the long run. [4x1=4 Marks] Q2. Analyse the behavior of LANDLORDS while the low rents are observed in the market. [4x1=4...

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Under the rent controlled measures implemented by the government there was PRICE CEILING introduced in Oman....

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