Suppose the rent control (price ceiling) in California will be nullified for a year and that market rents will now be institutionalized. Assume that all apartment units are of identical structure and so are offered at the same rent. To address the plight of the residents, especially those who may be unable to pay the market rent, an income subsidy will be given to all low-income households equal to the difference between the old controlled rent and the new market rent. a. In a diagram, show the effect on the market for apartments the elimination of rent control. What will happen to the quality and quantity of rental housing supplied by the apartment owners? b. Use another diagram to show the additional effect of the income subsidy on the apartment market. What effect does it have on the market rental and quantity of apartments supplied in comparison to your answers to (a) c. Are the renters or tenants better or worse off as a result of these policies? What about the rentees or the landlords, are they better or worse off?
Suppose the rent control (
a. In a diagram, show the effect on the market for apartments the elimination of rent control. What will happen to the quality and quantity of rental housing supplied by the apartment owners?
b. Use another diagram to show the additional effect of the income subsidy on the apartment market. What effect does it have on the market rental and quantity of apartments supplied in comparison to your answers to (a)
c. Are the renters or tenants better or worse off as a result of these policies? What about the rentees or the landlords, are they better or worse off?
Step by step
Solved in 3 steps with 2 images
