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Author Question: What are the effects of a rent ceiling set below the equilibrium rent? What will be an ideal ... (Read 55 times)

cartlidgeashley

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on: Jun 29, 2018
What are the effects of a rent ceiling set below the equilibrium rent?
 
  What will be an ideal response?

Question 2

Over the past decade, the incomes of the top 1 percent have increased while the incomes of the middle class declined. These changes mean that the Lorenz curve moved ________ the 45 degree line and the Gini ratio has ________.
 
  A) closer to; decreased
  B) closer to; increased
  C) further away from; decreased
  D) further away from; increased
Foundations of Microeconomics ¦ Bade, Parkin ¦ 8th Edition
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Jevvish

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Reply #1 on: Jun 29, 2018
Answer to Question 1

A rent ceiling is the maximum legal rent. If the rent ceiling is set below the equilibrium rent, the rent ceiling creates a shortage of apartments. Consumer and producer surplus are both reduced. Hopeful renters face must engage in increased search activity. In order to rent an apartment, renters and landlords might engage in black market activity that effectively raises the rent.

Answer to Question 2

D


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