Bringing Supply and Demand Together


While non-equilibrium prices can occur naturally in the private sector, reflecting uncertainty, they seldom last for long



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Bringing demand and supply together

While non-equilibrium prices can occur naturally in the private sector, reflecting uncertainty, they seldom last for long.

  • While non-equilibrium prices can occur naturally in the private sector, reflecting uncertainty, they seldom last for long.
  • Governments, however, may impose non-equilibrium prices for significant time periods.
  • Price controls involve the use of the power of the state to establish prices different from the equilibrium prices that would otherwise prevail.

The motivations for price controls vary with the market under consideration.

  • The motivations for price controls vary with the market under consideration.
  • A price ceiling, or a legal maximum price, is often set for goods deemed important to low income households, like housing.
  • A price floor, or a legal minimum price, may be set on wages because wages are the primary source of income for most people.

Under rent control the price (or rent) of an apartment remains fixed over the tenure of an occupant, except for allowable annual increases tied to the cost of living or some other price index.

  • Under rent control the price (or rent) of an apartment remains fixed over the tenure of an occupant, except for allowable annual increases tied to the cost of living or some other price index.
  • When an occupant moves out, the owner can usually, but not always, raise the rent to a near-market level for the next occupant.
  • Rent Controls

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