Economics of Public Issues (19th Edition)
Economics of Public Issues (19th Edition)
19th Edition
ISBN: 9780134018973
Author: Roger LeRoy Miller, Daniel K. Benjamin, Douglass C. North
Publisher: PEARSON
Question
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Chapter 11, Problem 1DQ
To determine

Concept introduction:

Rent control:

Rent control refers to a system in which the government interferes with the rent charged for apartments in different buildings. The purpose is to ensure that a fair amount of money is charged by the landlords. Rent control ensures that well-maintained homes are rented at a low price.

Expert Solution & Answer
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Explanation of Solution

  • Under the rent control system, rents are kept below the free competitive level rent because of the price ceiling set by the government.
  • The government controls the rent for apartments but not houses because it is the middle income group of people that requires apartments. Considering their income levels, they are not able to buy their own houses. On the other hand, the rich people have higher purchasing power to build their own houses.
  • To ensure that middle class people get homes at affordable rates, the government imposes price ceilings on rented apartments.
  • Since, houses are bought by rich people who do not need rented apartments and have enough money to pay for rents even when the rates are higher so, the government does not control the rent of individual houses.
  • In order to reduce the problem of homelessness in the economy, the government interferes in the market and controls the rent of apartments rather than houses.

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