Some years ago New York City imposed rent controls in an effort to provide housing at "fair" prices for as many people as possible. The result was a serious shortage of housing and deterioration of existing rental properties. How would an economist have described the result in terms of economic efficiency?
Keeping the prices low discouraged the construction of housing in the city and the upkeep of existing housing. Interfering with free markets by preventing rental prices to increase prevented the market from reallocating sufficient resources to help cut down the shortage of housing efficiently. As a result, the MU of additional rental units exceeds the MC of production, but since the price is kept artificially low, landlords have little incentive to build new apartments.
You might also like to view...
In the burglary crime model presented in the textbook, as the anguish cost of committing a burglary rises, the prediction is that
A) more people will commit burglary. B) the same number of people will commit burglary. C) fewer people will commit burglary. D) There is not enough information to answer this question.
Assets minus liabilities equal:
A. current income minus spending on current needs. B. wealth. C. saving. D. investment.