Advantages And Disadvantages Of Price Control

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Price controls are a type of government regulation used to establish a maximum price that can be charged for goods and services. Price controls have both advantages and disadvantages for consumers and producers. Price controls prevent money loss on both sides and help find an equilibrium for producers and consumers in the market. There are two different barriers to price controls: price ceilings and price floors. A price ceiling it put in place to regulate how high of a price can be charged for a specific item. The price ceiling makes it possible for consumer to purchase goods without breaking the bank. On the other hand, price floors are enacted to establish how low a price can go. The purpose of a price floor is to prevent consumers from…show more content…
The disadvantages of rent control for tenants include issues such as the removal of market efficiency. For instance, in efficient markets the purpose is that both parties will agree upon a price, the market equilibrium, and in some instances renters are able to rent below the equilibrium price. When a price control is put into place this no longer becomes an option for tenants. The other issues for tenants is that the more demand there is in conjunction with less supply leads to an increase in price. For landlords rent control means a few things. First, it can mean that because rent controlled apartments are a good deal for tenants they are more motivated to hold onto them which means easy to manage properties and a steady cash flow. The cons of price controls for landlords include their inability to charge rent that matches the market, leading to less income and therefore, run down properties, less desirable tenants and a loss in overall property value. Another issue is that because of the low prices of some rental properties families tend to avoid moving, ultimately leading to many issues such as families that are not a best fit or are too large for an apartment continuing to occupy it. The opposite could also be an issue. A family of two could occupy a house much larger that could be rented out to someone with a larger families also known as the "old lady effect" (Block). This further compels the
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