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UK Housing sector, rent ceilings (4 types of intervention from governemt,…
UK Housing sector, rent ceilings
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when there is a housing shortage due to rent ceilings we see a rise in queuing, discrimination, lottery and black markets
The lottery system is an informal way of allocating scares housing (resource). Some individuals are luck and some are unlucky.
Discrimination takes place where landlords choose who they want to rent the property, based on who appeals to them
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Search activity
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Search activity is a great cost, (Opportunity cost of housing = regulated rent +opportunity cost of search activity )
As quantity of housing is less than the quantity in unregulated market, opportunity cost of housing exceeds unregulated rent.
Black Markets
This is an illigal market which operates alongside the legal market in which price ceilings have been imposed
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Agreements are made between renters and landlords above rent ceiling price. Also generally above unregulated rent prices
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Concepts:
Consumer surplus: Difference between price charges for a good and the maximum price they would be willing to pay.
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Dead weight Loss: Loss to society of price ceiling, something that should have been produced but was not.