Question

Price controls on rents are frequently implemented by governments in an effort to protect renters from high housing prices. Differentiate the type of price control used from other potential price controls, and then formulate reasons as to why governments should be careful when implementing these types of controls.

Answer 1

The types of price controls used by the government are:

Price floor - this is when the government sets the minimum price for a good or service.

Price ceiling - this is when the government sets the maximum price for a good or service.

The reason why the government should be careful about implementing price controls are:

Price controls can lead to the development of black markets.

Price controls can lead to shortages.

What are price floor and price ceiling?

Price ceiling is when the government or an agency of the government sets the maximum price for a product. It is binding when it is set below equilibrium price.

A price floor is when the government or an agency of the government sets the minimum price of a product. A price floor is binding if it is set above equilibrium price.

To learn more about a price ceiling, please check: brainly.com/question/26521358

Answer 2

Answer:

Price controls come in two forms, Price floors and Price ceilings.

Price Floors: Price floors are the minimum prices set for goods and services.

Price Ceilings: Price ceilings are the highest points at which goods and services can be sold.'

Reasons to be careful:

1. It can lead to shortages of housing, due to low prices
2. Could disrupt the system of supply and demand
3. It can make contractors unmotivated to make new housing

Summary: Price controls may have some downsides but are a good option when quick fixes are needed to fix an inflated housing market. They help create affordable housing and prevent monopolies from forming and controlling housing prices.