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:
- change the use of the property so that the controls don't apply,
adding to the housing shortage.
- maintain the property poorly, to reduce costs.
- charge illegal finder's fees and other illegal fees, to increase
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