Imposing rent control
Why the rent control cause the Black markets problem?
Black markets If somebody cannot obtain needed goods because a price ceiling reduces the quantity, they may turn to the black market. Those who—by luck or good management—obtain goods in short supply can profit by illegally selling at a higher price than the free market allows. The black market price is higher than the free market price because the quantity is less than in a free market transaction, where more sellers could afford to sell the product. People are sometimes forced to buy at these higher prices when a shortage happens and there is no other place to obtain these.
What is the problems of rent control?
Consequences of Binding Price Ceilings A price ceiling set below the free-market price has several effects. Suppliers find they can't charge what they had been. As a result, some suppliers drop out of the market. This reduces supply. Meanwhile, consumers find they can now buy the product for less, so quantity demanded increases. These two actions cause quantity demanded to exceed quantity supplied, which causes a shortage—unless rationing or other consumption controls are enforced. It can also lead to various forms of non-price competition so supply can meet demand.
Why might imposing rent control for student tenants cause problems?
In an unregulated market economy price ceilings do not exist. Students may incorrectly perceive a price ceiling as being on top of a supply and demand curve when in fact, an effective price ceiling is positioned below the equilibrium position.
When did the Rent control Start?
In the United States during World War 1, rents were "controlled" through the efforts of local rent anti-profiteering committees and public pressure. Between 1919 and 1924, a number of cities and states adopted rent and eviction control laws.
What is rent control?
Rent control refers to laws or ordinances that set price controls on the renting of residential housing. It functions as a price ceiling.A price ceiling is a government-imposed limit on the price charged for a product. Governments intend price ceilings to protect consumers from conditions that could make necessary commodities unattainable.