True or false: Any price ceiling above $2000 per month will be a binding price ceiling in the Sydney rental market.
Question
True or false: Any price ceiling above $2000 per month will be a binding price ceiling in the Sydney rental market.
Solution
To answer this question, we need more information about the Sydney rental market. Specifically, we need to know the equilibrium price (the price at which the quantity of apartments that landlords want to rent equals the quantity that renters want to rent).
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If the equilibrium price is below 2000 will not be binding. This is because the price that the market wants to set (the equilibrium price) is already below the price ceiling. In this case, the price ceiling has no effect on the market.
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If the equilibrium price is above 2000 could be binding, depending on how much above $2000 it is set. If the price ceiling is set above the equilibrium price, it will not be binding. But if it is set below the equilibrium price, it will be binding.
So, without knowing the equilibrium price in the Sydney rental market, we cannot definitively answer this question.
Similar Questions
The NSW government is worried that renters in Sydney are paying too much money on rent. Given this, they decide to introduce a price ceiling in the rental market that states that landlords cannot charge more than $1500 per month for rent to tenants. After this policy change, the market price of rental housing will be $ per month and the quantity of housing rented will be units (in '000s). There will be a of housing equal to units (in '000s).
Due to Covid, the unemployment rate increases sharply. Many households are not able to afford to pay rent for their housing. The government decides to implement price controls so that households continue to afford their rent. The demand function in the perfectly competitive house-renting market is given by: P = 2000 – 2Q. The supply function is given by: P = 1500 + 3Q. Which of the following price ceilings will be binding?Group of answer choicesP = 1500P = 1850P = 1900P= 1800None of the other answers is correct.
Which of the following would you expect to see in a market with a binding (effective) price ceiling?Selected answer will be automatically saved. For keyboard navigation, press up/down arrow keys to select an answer.aAll of the below.bSellers being able to pick-and-choose from among numerous willing buyers, perhaps deciding to sell only to friends or otherwise favored customerscCustomers lining up at stores long before they open for businessdBuyers illegally offering above-ceiling prices in an effort to entice sellers to sell to them.
If a price ceiling is binding: A. the equilibrium price is above the ceiling and there will be a shortage B. the equilibrium price is above the ceiling and there will be a surplus C. the equilibrium price is below the ceiling and there will be a surplus D. the equilibrium price is below the ceiling and there will be a shortage
Market equilibrium rental price is $ per month. Market equilibrium quantity is apartments.b. If the local government can enforce a rent-control law that sets the maximum monthly rent at $1,500, will there be a surplus or a shortage? . Of how many units? apartments per month.
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