Essay about demand and supply analysis - Essay Prowess

Essay about demand and supply analysis

Essay about demand and supply analysis

The demand /supply analysis

The government introduces rent control to prevent the tenants from paying high amounts of rents to landlord who operate on the assumption that supply is inelastic whenever the government fails to intervene. The government assumes that the rent control will neither do any real harm to the landlord nor discourage construction of new housing facilities. However, upon the implementation of the policy more people are in need of the housing units that comply with price control. The demand increases because the houses are affordable when compared to those that lack a price ceiling (Frank 53). Unlike the increase in demand the supply does not increase because the landlords are lack the motivation to set up new buildings. The lack of motivation is attributable to low rental income which translates to minimal profit margins. Further the investors opt to construct premises that are exempt from the price ceiling, as they guarantee a high return on investment. Consequently, the disequilibrium between supply and demand creates a housing shortage. Therefore, in the long run the rental control policy adversely affects the tenants that the government intended to assist.

Benefit/ Cost analysis

The only benefit of the rental control policy is that it makes accommodation affordable to the low-income earners and safe guards them against from extortion by the landlord. The poor are able to a

Activate subscription to View the Whole Post