Economics Assignment - (Solved)
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Added on 2020-04-15
Economics Assignment - (Solved)
Added on 2020-04-15
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Running head: ECONOMICS ASSIGNMENT Economics AssignmentName of the StudentName of the UniversityAuthor Note
Running head: ECONOMICS ASSIGNMENT Introduction In economics, the concept of market has been prevailing for a long time. A market, interms of economics, can be defined as the place of interaction of the buyers and the sellers ofdifferent goods and services, where these two sides interact to reach to a mutually agreeablepoint, which is known as equilibrium in the market. The willingness of the buyers to buy aproduct at different prices, is shown by the demand curve while the supply curve represents thesellers’ willingness to sell their products at different levels of prices. The notion of “InvisibleHand”, as first proposed by Adam Smith, states that if the economy is left in the hands of the freemarket, then the demand and the supply forces will interact with each other to bring stableequilibrium in the market (Oslington 2012). However, this proposition is not true always, especially in the contemporary globaleconomic scenario. Leaving the economy entirely upon the market mechanisms, often leads tosituation, which are hurting to either the consumers or the producers or both, thereby decreasingthe welfare in the economy. In such cases, interventions of the governing authorities in thesituations become important to mitigate the problems by imposing appropriate regulations andcontrols to the extent it is required (Skousen 2016). Keeping this aspect of government intervention and regulation in consideration, the essaytries to discuss the issues regarding the requirement of rent controls in the housing sectors of thebig cities. The essay also tries to analyze the positive and negative implications of price cappingin rent controls of houses in these places, taking help of different economic concepts and tools(Stiglitz and Rosengard 2015). Rent control in housing sector The housing sector of any economy is a crucial component of the economy as it deals with thehousing of the residents of that region, which in turn have significant implications on theproductivity, growth and industrial development of a region. The demand for housing and thesupply of the same, in an economy, highly depends on factors like the prospects of living in thatregion, economic welfare, the availability of housing accommodations and also welfare factors
Running head: ECONOMICS ASSIGNMENT like employment, infrastructure, health and educational scopes. Thus, the demand in the housingsector in the big cities tend to be high as the above mentioned features which positively affect thehousing demand are very common in these cities (Gilbert 2014). This high demand in the housing sector often influences the sellers to increase the rent ofthe houses that they offer which can be explained with the help of the following diagram: Figure 1: Change in the equilibrium due to increase in the demand(Source: As created by the author)As can be seen from the above diagram, due to the increase in the demand of thehousings in a city, the suppliers can demand a higher price as there come more consumers whoare willing to take the housings at a higher rent (Forrest and Murie 2014). However, often this higher house rents become painful on part of the consumers,especially the middle class and the poor ones, for whom housing in these cities become
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