Governments have on many occasions intervened in the market to establish a binding price ceiling. You are required in answering the following questions to draw upon the experience of at least one government, via an internet and library search, which has instituted a binding price ceiling in the rental accommodation market. Countries that can be researched are India, many states in the USA, Finland, Italy, Malaysia (Penang), United Kingdom and the countries of the Soviet Union (USSR) between 1945 and 1989.
- Why would governments act to establish a binding price ceiling in the market for rental accommodation?
2 marks
2. Describe, using diagrams where appropriate, the market for rental accommodation before and after the introduction of rent controls. Illustrate the surpluses accumulating to producers and consumers before and after the introduction of the price ceiling.
4 marks
3. How does a "Black Market" operate, using diagrams where appropriate, in a regulated rental market? Who benefits and who loses from its operation?
4 marks
4.What other problems arise with the introduction of rent controls? Discuss, using diagrams where appropriate, two such problems, one on the demand side of the market and one on the supply side of the market.
4 marks
5.Discuss in detail one non-price techniques of allocation that the government could introduce in attempt to achieve equity (fairness) and one for administrative efficiency in the now regulated market. Discuss
2 marks
6.Discuss 2 options that are open to the owners of rental property (landlords) to choose a renter in the absence of a government method of allocation.
2 marks
7.Describe how one of these solutions operates and what advantage it has over the other technique.
Referencing 2 marks