Critical Thinking in Economics, Essay Example

Pages: 1

Words: 313

Essay

One consequence of rent control is a shortage of apartments, which is shown in the figure. Suppose rent control also leads to a reduction in the supply of affordable apartments. Use the figure on this page to illustrate the effects of a reduction in supply, and explain what will happen to the shortage of apartment.

As shown in the diagram, one of the main effects of a price ceiling is a mismatch between supply and demand for apartments; that is, demand for apartments outstrips supply due to a lower price clearing the market. This analysis takes account of the aggregate number of apartments available at the average price in the neighborhood. If one extends this analysis to affordable apartments (there is a reduction in the supply of affordable apartments) this will initially aggravate the existing gap between demand and supply- that is, there will be even more demand (shifting it to the right) and the supply curve will shift in.  Overall, the shortage of apartments will increase as a result of this issue.

One reason some economics are critical of rent control laws is that they create a deadweight loss. Using the figure on this page, identify the area representing the deadweight loss. What causes the deadweight loss? What would the supply curve have to look like for the deadweight loss to equal zero?

Deadweight loss is essentially the loss to society due to inefficiencies in a particular market- in this case, the government’s decision to put a price ceiling on a certain number of apartments.  In order for the deadweight loss to be zero, the price floor would have to be abolished and the apartment equilibrium price of $2,318.00 would need to be reinstated.  The approximate area of the deadweight loss would be between the equilibrium without the price ceiling and the supply curve with the price ceiling as it moves towards the equilibrium price.

Time is precious

Time is precious

don’t waste it!

Get instant essay
writing help!
Get instant essay writing help!
Plagiarism-free guarantee

Plagiarism-free
guarantee

Privacy guarantee

Privacy
guarantee

Secure checkout

Secure
checkout

Money back guarantee

Money back
guarantee

Related Posts

John W. Walton’s: Compassionate Care, Essay Example

Introduction Few challenges in life are as painful and as difficult as the call to attend to those suffering from extreme illness, or who are [...]

Pages: 1

Words: 3526

Essay

Attraction, Romance and Love, Essay Example

Introduction This paper examines the aspect of Attraction, Romance and Love from the psychological perspective.  Essentially how this human behavioural pattern relates to psychological stimulation [...]

Pages: 1

Words: 2294

Essay

The Universality of Narrative, Article Review Example

“Narrative can be, and often is, an instrument that provokes active thinking and helps us work through problems, even as we tell about them or [...]

Pages: 1

Words: 328

Article Review

Cosmetic Surgery the Magic Potion, Essay Example

Introduction Advances in medical procedures, along with social influences also increased through technology and media, have made cosmetic surgery a massive industry today.  The options [...]

Pages: 1

Words: 3906

Essay

How Far Will International Economic Integration Go? Article Review Example

The article of Dani Rodrik hopes to create a new vision of understanding how economic growth and development occurs in the modern society. Considering the [...]

Pages: 1

Words: 457

Article Review

Perspectives From the Past, Essay Example

Perspectives from the Past is a book, which contains various articles from different authors about Western Civilization from the Age of Exploration through to contemporary [...]

Pages: 1

Words: 1189

Essay

John W. Walton’s: Compassionate Care, Essay Example

Introduction Few challenges in life are as painful and as difficult as the call to attend to those suffering from extreme illness, or who are [...]

Pages: 1

Words: 3526

Essay

Attraction, Romance and Love, Essay Example

Introduction This paper examines the aspect of Attraction, Romance and Love from the psychological perspective.  Essentially how this human behavioural pattern relates to psychological stimulation [...]

Pages: 1

Words: 2294

Essay

The Universality of Narrative, Article Review Example

“Narrative can be, and often is, an instrument that provokes active thinking and helps us work through problems, even as we tell about them or [...]

Pages: 1

Words: 328

Article Review

Cosmetic Surgery the Magic Potion, Essay Example

Introduction Advances in medical procedures, along with social influences also increased through technology and media, have made cosmetic surgery a massive industry today.  The options [...]

Pages: 1

Words: 3906

Essay

How Far Will International Economic Integration Go? Article Review Example

The article of Dani Rodrik hopes to create a new vision of understanding how economic growth and development occurs in the modern society. Considering the [...]

Pages: 1

Words: 457

Article Review

Perspectives From the Past, Essay Example

Perspectives from the Past is a book, which contains various articles from different authors about Western Civilization from the Age of Exploration through to contemporary [...]

Pages: 1

Words: 1189

Essay