Answer to Question #80970 in Microeconomics for Cody

Question

Suppose Jimmy McMillan from the Rent Is Too Damn High Party wins the next mayoral race in New York City. He imposes a price ceiling on rent in New York City of $1,000 per month (for 1 bedroom). Discuss what the likely effects would be on the quality of rental housing available and why.

Answer 1

If Jimmy McMillan imposes a price ceiling on rent in New York City of $1,000 per month (for 1 bedroom), then the quantity supplied will decrease and most of more expensive suppliers with high quality of accommodation will exit the market, the quantity demanded will increase, so there will be a shortage and the overall quality of rented accommodation will decrease.