rent ceiling

[hopetobeat]

What's the rent price in a loosely regulated rent ceiling enviornment?

 

[willispierre]

equilibrium price

 

[th123]

restrictions that are loosely enforced are ineffective, and so price is close to the otherwise unregulated levels

 

[hopetobeat]

Is that so simple? I don't know. Ok, one point less

 

[dashingdude]

Maybe I dont remember it correctly but I reckon the choice was that restrictions that are loosely enforced are ineffective and so the price is higher than otherwise unregulated level. Either way, I picked up this choice.

 

[topher]

yup, that's what i chose. equilibrium

 

[adalfu]

Hey guys,
I believe it's the price any given buyer is willing to pay: so...

if you picture the supply-demand graph, the price ceiling will be a horizontal line below the equilibrium point. Now find where that line intersects the supply graph. That's the supply output (i.e., a shortage), then draw a vertical line at that intersection. The maxium price a buyer would pay (if black market is loosely enforced) will be the price that meets the demand curve.

Hope that helps.

 

[amberpower]

I agree adalfu, there was a section about it in the texts.

 

[th123]

adalfu Wrote:
-------------------------------------------------------
> Hey guys,
> I believe it's the price any given buyer is
> willing to pay: so...
>
> if you picture the supply-demand graph, the price
> ceiling will be a horizontal line below the
> equilibrium point. Now find where that line
> intersects the supply graph. That's the supply
> output (i.e., a shortage), then draw a vertical
> line at that intersection. The maxium price a
> buyer would pay (if black market is loosely
> enforced) will be the price that meets the demand
> curve.
>
> Hope that helps.

Did it ask for the maximum price or did it ask where prices would land?

I think the level of enforcement is the key point- your logic is sound for the max price, not not for the typical price.

 

[adalfu]

I don't recall the exact question: but depending on how they phrased it, we could interpret it couple of ways. Had the question asked what's the maximum (or even what's the buyer willing to pay), I would still interpret it this way. I might be wrong.

 

[th123]

if it is strictly enforced, the regulated price will be the typical price

if it is lossely enforced, the regulated price will be greater than the typical price

without regard to the level of regulation, the maximum price would be the regulated price