Question

Explain how both renters and landlords could be either winners or losers with the imposition of rent control.

Answer 1

Sol :

Rent Control is an example of price ceiling . It means impsoing of price by the government which is generally less than the Equilibrium Price.

Effect of Rent Control (Price Ceiling) are as follows :

• Imposing of lower prices than the equilibirum price means creating a situation of Excess demand
• Excess demand means demand exceeds the supply.
• Rent control is the policy which leads to create a situation of shortage.

Rent Control's Diagram :

Price (8) Ya S Et price E P Price control & Pi Shostages B A L Q 92 T Quantity supplied t Quantity Guantity demanded

In this case , Neither Landlords nor tenants are winners. both of them are losers in this case , because of following reasons :

• Shortage of apartments will induce the landards to ration the houses.
• Due to rationing , people have to suffer , they have to wait for long hours or will get low quality of houses etc.
• in order to get the better apartments , some of the people will start giving more of the payments in excess of price ceiling. ( ultimately they are paying the same amount as before of rent control)
• Hence, Landlords loses the Revenue which would they earn , if rent control was not there and Renters ultimately paying the less rent but will get lower Quality houses.