Understanding Rent Control and Price Mechanisms

These flashcards cover key concepts related to price controls, specifically focusing on rent control, market dynamics, and economic principles.

Price Ceiling

A government-imposed limit on how high a price can be charged for a product or service.

Price Floor

A minimum allowable price set by the government to prevent prices from being too low, as in minimum wage laws.

Binding Price Ceiling

A price ceiling set below the equilibrium price that results in a shortage of goods.

Nonbinding Price Ceiling

A price ceiling set above the equilibrium price that does not affect the market outcome.

Rent Control

Legislation that limits the amount landlords can charge for renting out a property to maintain affordability.

Altruistic Reasons

Motivations based on the desire to help others, often cited in support of price controls.

Shortage

A situation in which the quantity demanded exceeds the quantity supplied at a given price.

Long Run vs Short Run

In economics, the long run allows for more elasticity in supply and demand, leading to different market outcomes compared to the short run.

Elastic Demand

Demand that is sensitive to changes in price, meaning that as price increases, total revenue can decrease.

Scalpers

Individuals or businesses that buy goods at a low price due to market inefficiencies and resell them at a higher price.