Looking in depth at controlled rents, in which there is a binding maximum rent.
> A shortage occurs. Because the low cost raises quantity demanded while simultaneously lowering quantity supplied. Thus a shortage occurs, the market is not cleared.
Outcomes:
- Reduced availability, when the goal was to increase availability.
- Overall quality decreases. Owners cant increase RENT to pay for upkeep, quality declines.
- Black markets emerge from displaced competition (bribes ect.)
- Misallocations arise,
- Other non rent controlled neighborhoods feel effects of the nearby shortage. Increased demand.
- Fairness issue (poor cant move to other areas as easily, cant bribe, ect)
- Discrimination is free because there is a line, so there is lots of discrimination.
-Rizzo
Daniel Gaona
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