1. Why does rent control result in a shortage of rental units?2. Any time there is a shortage of a...

Question

1. Why does rent control result in a shortage of rental units?
2. Any time there is a shortage of a good it means that the price is too low. Analyze this statement.
3. The governement's "war on Drugs" has been a complete failure. Is this a demand issue or supply issue? Depending upon your answer, what would be a more economically efficient way of approaching the problem

Robert · Accepted Answer

1. Rent control is the common example of price ceiling. The adverse effects 
of rent control are fewer apartments to the general population because these 
effects occur over many years. In the short run rent control does not make any 
impact because supply and demand for housing are relatively inelastic. In the 
long run it does have an impact on housing. On the supply side, landlords 
respond to low rents by not building new apartments and failing maintain 
existing ones. On the demand side, low rents encourage people to find their own 
apartment and induce more people to move into a city.

1. Why does rent control result in a shortage of rental units? 2. Any time there is a shortage of a good it means that the price is too low. Analyze this statement. 3. The governement's "war on Drugs"...

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