The point of a price ceiling is typically to offer economic relief to lower income consumers in areas that are relatively essential; such as housing, or food in some countries. While this is an admirable goal, price ceilings may not always achieve this in the most effective manner. Consider the example of rent control; a type of price ceiling that is used in a number of cities. Because rent is below equilibrium, rent controls automatically generate a housing shortage. Rent controls generate incentives that may cause property owners to:
Copyright © 1995-2004 OnLineTexts.com, Inc. - All Rights Reserved