A Good Example Of A Price Floor Is Rent Control

Which of the following is an example of a price floor.

A good example of a price floor is rent control.

Suppose that a city government passes a rent control law to keep the price at the original equilibrium of 500 for a typical apartment. In the horizontal line at the price of 500 shows the legally fixed maximum price set by the rent control law however the underlying forces that shifted the demand curve to the right are still there. For example in 2005 during hurricane katrina the price of bottled water increased above 5 per gallon. Rent control aims to ensure the quality and affordability of housing in the rental market.

The equilibrium price commonly called the market price is the price where economic forces such as supply and demand are balanced and in the absence of external. Agricultural price supports. The local government can limit how much a landlord can charge a tenant or by how much the landlord can increase prices annually. If the government imposes a rent control on apartments this will lead to an excess supply of apartments.

Rent control like all other government mandated price controls is a law placing a maximum price or a rent ceiling on what landlords may charge tenants. Rent control is a common type of price ceiling that large municipalities such as new york city often impose to make housing more affordable for low income tenants. A binding price ceiling imposed on a good leads to excess demand for this good. Rent control in new york city was established after world war ii to ensure that soldiers and their families could pay rent and retain their homes.

Suppliers are willing to supply more at the price floor than the market wants at that price. New york and san francisco have famous rent control laws. A price ceiling is a legal maximum price that one pays for some good or service. Example of a price ceiling.

Rent control is a classic example of a price ceiling. A price floor is a government or group imposed price control or limit on how low a price can be charged for a product good commodity or service. Rent control from the concise encyclopedia of economics. If it is to have any effect the rent level must be set at a rate below that which would otherwise have prevailed.

To ensure more affordable housing the government often sets a price ceiling on rents. A government imposes price ceilings in order to keep the price of some necessary good or service affordable. Rent control is a prominent price ceiling example.