A price ceiling impacts both supply and demand in the context of rent control, influencing the equilibrium in the rental housing market.
A price ceiling is a government-imposed limit on how high a price can be charged for a product or service. In the context of rent control, a price ceiling impacts both supply and demand. Rent control laws aim to keep rents affordable for tenants, which affects both the quantity of rental housing supplied and the demand for it.
For example, when a rent control law is implemented, it restricts landlords from increasing rents beyond a certain level, influencing the supply of rental housing available in the market. Simultaneously, it affects demand as tenants may be more inclined to rent properties due to the capped prices, leading to changes in overall demand.
Illustrated in a diagram, a price ceiling shifting both supply and demand would show how the equilibrium point changes as a result of the government intervention in the form of rent control.
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