Rent Control

… a core concept in Economic Analysis and Atlas102

Click for MRU video

Click for MRU video

Concept description

Alex Tabarrok (reference below, video on right), analyzes the price ceiling regulation of rent control in terms of the five major unintended consequences of government-regulated price ceilings (see Price Ceilings).

Tabarrok notes the impact on shortages, making the crucial distinction between the impact of this price ceiling on short term supply (which is inelastic) and long term supply, which is elastic.

RentAndShortagesyHe adds some interesting data from Ontario, which introduced rent controls in 1975. The decline in new units began as soon as the policy measure began seriously debated,  three years before rent controls were adopted.

DebatingRentControl

Tabarrok notes the impact on quality, which can go so far as to turn neighbourhoods into slums:

ReductionQualityRent

And on wasteful lines and search costs, including illegal ways to compete such as paying a bribe-like premium for a “furnished apartment” which has minimal furniture.

WastefulLinesRenty

And on misallocation of resources:

RentMisallocation

Practice questions

From http://www.mruniversity.com/node/201794, accessed 1 May 2016.

Atlas topic, subject, and course

The Price System and Price Regulation (core topic) in Economic Analysis and Atlas102 Economic Analysis.

Source

Alex Tabarrok, Price Ceilings: Rent Controls (10-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/rent-controls-economics, accessed 1 May 2016.

Page created by: Ian Clark, last modified 1 May 2016.

Image: From the source video noted above, accessed 1 May 2016.