country
$20 Bonus + 25% OFF
Securing Higher Grades Costing Your Pocket? Book Your Assignment at The Lowest Price Now!

Organization For Economic Operation And Development

tag 0 Download6 Pages / 1,281 Words tag Add in library Click this icon and make it bookmark in your library to refer it later. GOT IT

Question:

Discuss about the Organization for Economic Operation and Development.
 
 

Answer:

Introduction

Rental price control is the policy of the government fixing a cap on the rental price such that the house owners do not charge their tenants high price above the cap price. The government is mostly obliged to maintain a high standard of social welfare which is lost when there is a hike in housing prices (England, 2015). The reason why the government decides to impose a price cap on housing is because in the current period the economy has experienced rental and property prices hikes (Pettinger, 2013). The government is always scared of price hikes as they represent bubbles that eventually burst leaving the economy in a very bad situation. This paper will help in determining whether it is beneficial to impose a rental price cap or not. It will determine the winning party and the losing party; the parties involved are the tenants and their landlords. It will tell whether the landlords are more or less likely to observe the policy. Generally it can be argued that, the landlords would only observe the policy if it were beneficial to them; if it’s not, they are more likely to disregard it and engage in other black-market business which would be more profitable to them. The paper will provide the primary aim of imposing the cap and determine whether it is achieved.

The price cap imposition is meant to increase the housing affordability. At very high prices, the lower income people cannot afford and this issue is a concern to the government. To create some equality, the price cap is imposed at an affordable price. Therefore, the cap is fixed below the current equilibrium point. Naturally, without the price cap, the premium areas are set only to people with a middle income and above (E.H, 2015). The lower income group are forced to move out many miles in order to find an affordable house.

The free market equilibrium point is at price Pe and quantity demanded is Qe. This is the high price that the government is attempting to reduce through a price cap. Thus the cap is set at price Pc which is lower than Pe; it is the maximum rent to be charged for a rented property. At the lower price Pc, the affordability of households goes up creating an excess demand at the current supply level (McKernan, 2011). The excess demand is the extra demand beyond quantity Q1 which the suppliers are willing to supply at the lower price = (Q2 – Q1). The cap results in the reduction of the landlords’ returns. Initially the returns to the landlord was equivalent to figure 0QeXPe; however, the new level of revenue is equivalent to figure 0Q1YPc. So this is a clear evident that the landlords are the losing party.

Riley (2012) argued that these effects would cause a fall in the supply for rental houses causing the supply curve to shift up as indicated by the arrows. This is because some landlords won’t be willing to continue supplying at the lower price and will thus exit the housing markets; (McKernan, 2011). This therefore means that a price cap cause shocks to the housing supply (Butler, 2016). Otherwise, the suppliers could exploit the consumer’s surplus by charging the tenants some additional costs by offering their houses at black-market rent (Pb). This rent is high and even above the initial equilibrium price, but the quantity supplied is still equal to the prices cap’s supply level as shown in the diagram. This possibility of the supplier exploiting the consumer surplus is undermining the effectiveness of a rental price cap.

 

Owing to the problems associated with the price rental caps described above (i.e. shocking of supply and the charging of a higher black-market rent), the objective of the government to improve housing affordability is not achievable. The high black-market rent is even more troublesome than the current free market equilibrium price. The ineffectiveness of this policy is quoted by the statement by German Institute for Economic Research that “Price capping treats the symptoms, not the disease,” (Niewöhner-Pape, 2014). It doesn’t address the problem fully. The consumers who were intended to be the beneficially ends up being disadvantaged.

The rent control may be useful in the short term but harmful in the long term since the shocking of supply would result in undersupply of rented houses. Since maintenance and upgrading of the houses may not fetch better returns for the landlords, the cap creates a disincentive for such improvement and the quality of houses deteriorates (OECD, 2010). Due to this deterioration, the tenants suffer external costs that are a negative externality from imposing the cap. Rent controls is only applicable to rental houses and not to luxury houses, thus, investors will shift from constructing rental to luxury houses to escape the rent control.

Riley (2012) argued that the increment in affordability enables many people to live by themselves thus creating a shortage. Many teenagers live with their parents since they can’t afford to pay higher rental prices; the lower price may change this situation. Due to the inadequacy of supply, the cap results in an opportunity cost of the increased search time (i.e. people take more time to trace a vacant house). The rent control does not improve the availability of quality housing and would be of most people’s expectations.

Conclusion

The rental price cap does not solve the problem of hiking rental and apartment prices; it even makes it worse. The major issue here is that market clearing cannot be achieved since it stimulates demand but on the other hand it shocks supply. The problems of allocative inefficiency still exists and equality is unachievable. Since cap rent is expected to continue even in the long run, the economy will be bad-off by then. Those who will occupy the capped rental houses will continue enjoying the benefits, but what about the future generation? The capped rental houses will be of no help to them as they will be fully occupied and there will be a shortage that will cost them dearly. The policy would only be effective if the government also came up with a policy to stimulate supply at the cap price to supplement the rental cap price policy. This would include subsidies on construction of houses and even lower taxes on building constructions. Else, the cap alone cannot improve housing affordability and hence it is not workable.

 

References

Butler, P. (2016). Benefit cap on social housing will leave thousands homeless, landlords warn. The Guardian. Retrieved 18 April 2017, from https://www.theguardian.com/society/2016/jan/26/benefit-cap-on-social-housing-will-leave-thousands-homeless-landlords-warn.

E.H. (2015). Do rent controls work? Economist.com. Retrieved 17 April 2017, from https://www.economist.com/blogs/economist-explains/2015/08/economist-explains-19.

England, C. (2015). Here's Why a UK Rent Cap Could Make You Even Poorer. Vice.com. Retrieved 18 April 2017, from https://www.vice.com/en_uk/article/would-a-rent-cap-actually-work-822.

McKernan, S. (2011). Prohibitions, Price Caps, and Disclosures: A Look at State Policies and Alternative Financial Product Use (1st ed., pp. 8-10). DIANE Publishing.

Niewöhner-Pape, K. (2014). German Residential: Price cap will not halt demand for houses. Realestate.ipe.com. Retrieved 19 April 2017, from https://realestate.ipe.com/markets-/sectors/residential/german-residential-price-cap-will-not-halt-demand-for-houses/10004261.fullarticle.

Organization for Economic Co-operation and Development (OECD). (2010). Paying for biodiversity: Enhancing the cost-effectiveness of payments for ecosystem services. Paris: OECD.

Pettinger, T. (2013). Would a cap on house prices work? Economicshelp.org. Retrieved 18 April 2017, from https://www.economicshelp.org/blog/9140/economics/cap-house-prices-work/.

Riley, G. (2012). Unit 1 Micro: Revision on Maximum Rents in Housing. tutor2u. Retrieved 18 April 2017, from https://www.tutor2u.net/economics/blog/unit-1-micro-revision-on-maximum-rents-in-housing.

Download Sample

Get 100% money back after download, simply upload your unique content* of similar no. of pages or more. We verify your content and once successfully verified 100% value credited to your wallet within 7 days.

Upload Unique Document

Document Under Evaluation

Get Credits into Your Wallet

*The content must not be available online or in our existing Database to qualify as unique.

Cite This Work

To export a reference to this article please select a referencing stye below:

My Assignment Help. (2018). Organization For Economic Operation And Development. Retrieved from https://myassignmenthelp.com/free-samples/organization-for-economic-operation-and-development.

"Organization For Economic Operation And Development." My Assignment Help, 2018, https://myassignmenthelp.com/free-samples/organization-for-economic-operation-and-development.

My Assignment Help (2018) Organization For Economic Operation And Development [Online]. Available from: https://myassignmenthelp.com/free-samples/organization-for-economic-operation-and-development
[Accessed 15 July 2020].

My Assignment Help. 'Organization For Economic Operation And Development' (My Assignment Help, 2018) <https://myassignmenthelp.com/free-samples/organization-for-economic-operation-and-development> accessed 15 July 2020.

My Assignment Help. Organization For Economic Operation And Development [Internet]. My Assignment Help. 2018 [cited 15 July 2020]. Available from: https://myassignmenthelp.com/free-samples/organization-for-economic-operation-and-development.


For years, MyAssignmenthelp.com has been operating as one of the cheap assignment help providers in the USA. We are one of the best college paper writing services that keep service price minimal. We do not let the affordability of our service to hamper the standard of our work. We have separate teams of experts to provide report writing help . At MyAssigenmnthelp.com, we believe in earning credibility, so students can pay for assignments only after getting satisfied solutions. Tough assignments bother you? Trust us with your project. You will not regret paying us to write assignments for you.

Latest Economics Samples

ECON6000 Economic Principles And Decision Making

Download : 0 | Pages : 7
  • Course Code: ECON6000
  • University: Laureate International Universities
  • Country: United States

Answer: Introduction: The aspect of demand elasticity is one of the crucial aspects in decision making of any business. Demand elasticity indicates the extent of change in demand proportion following a change in different demand determining factors. Demand and hence sales of a business responds the most for a change in own price of the product, income level of buyers and price of its competitor’s product (Carbaugh, 2016). The different ...

Read More arrow

SBLC4004 Economics For Business Specification

Download : 0 | Pages : 11
  • Course Code: SBLC4004
  • University: University Of Wales Trinity Saint David
  • Country: United Kingdom

Answer: Introduction The analysis of housing market of UK is an interesting aspect for several reasons. Housing market in UK holds a pivotal position in the economy. As compared to other European nations UK has a much higher owner occupation rate. In 2011, UK’s owner occupation rate was 70% as compared to a rate of 45% in Germany and 56% in France. The housing price in UK has constituted a steady upward trend in the last few years. The ...

Read More arrow Tags: United Kingdom London Management Business & corporate finance University of London 

ECF3120 Consumer Economics

Download : 0 | Pages : 7
  • Course Code: ECF3120
  • University: Monash University
  • Country: Australia

Answer: Background of the study The topic for the proposal is the apparel consumption in Australia. The rise in online apparel retailing is taking away the profits of the local retail apparel shops in Australia. The apparel retail comprise of the sale of women’s, men’s and infant’s wear. The revenue growth from the online retail business is about 15.1 percent which is a threat for the local retailers as customers are shiftin...

Read More arrow Tags: Australia 6 Consumer Economics Monash University 

HI5003 Economics For Business 34

Download : 0 | Pages : 3

Answer: 1. (A) Name of point B is inefficient. Name of point A is efficient. Name of point D is unattainable. 10 units of machinery is the opportunity cost of producing 10, 000 more tons of rice when the economy of Nepal is operating at point T. (B) (B1) Discovery of fertilizer would increase the output of rise given the amount of other things will take the economy of Nepal to PPF2. (B2) Discovery of steel would increase the production of ...

Read More arrow Tags: Australia 6 economics for business Holmes Institute 

POLI1095 Evidence Policy And Practice

Download : 0 | Pages : 6
  • Course Code: POLI1095
  • University: Royal Melbourne Institute Of Technology
  • Country: Australia

Answer: Impact of COVID-19 on the Australian economy Australia is renowned as the fourteenth largest economy in the world that has the total Gross Domestic Product of about 1.69 trillion Australian dollars in 2019. It follows a mixed market economy which is one of the most developed in the world. The economy has already faced an economic loss due to the bush fire that took place in the beginning of 2020 and had been struggled to balance its e...

Read More arrow Tags: Australia 6 Evidence  Policy and Practice Royal Melbourne Institute of Technology 
Next
watch

Save Time & improve Grade

Just share Requriment and get customize Solution.

question
We will use e-mail only for:

arrow Communication regarding your orders

arrow To send you invoices, and other billing info

arrow To provide you with information of offers and other benefits

1,362,109

Orders

4.9/5

Overall Rating

5,082

Experts

Our Amazing Features

delivery

On Time Delivery

Our writers make sure that all orders are submitted, prior to the deadline.

work

Plagiarism Free Work

Using reliable plagiarism detection software, Turnitin.com.We only provide customized 100 percent original papers.

time

24 X 7 Live Help

Feel free to contact our assignment writing services any time via phone, email or live chat.

subject

Services For All Subjects

Our writers can provide you professional writing assistance on any subject at any level.

price

Best Price Guarantee

Our best price guarantee ensures that the features we offer cannot be matched by any of the competitors.

Our Experts

Assignment writing guide
student rating student rating student rating student rating student rating 5/5

265 Order Completed

97% Response Time

Ken Campbell

MSc in Electrical Engineering

Wellington, New Zealand

Hire Me
Assignment writing guide
student rating student rating student rating student rating student rating 5/5

1592 Order Completed

96% Response Time

Jane Sima

Ph.D in Psychology with Specialization in Industrial-Organizational Psychology

Singapore, Singapore

Hire Me
Assignment writing guide
student rating student rating student rating student rating student rating 5/5

134 Order Completed

95% Response Time

Thomas Nelson

MS in Information Systems Technology with Specialization in Database Administration

New Jersey, United States

Hire Me
Assignment writing guide
student rating student rating student rating student rating student rating 5/5

440 Order Completed

99% Response Time

Jack Arens

MBA in HRM

London, United Kingdom

Hire Me

FREE Tools

plagiarism

Plagiarism Checker

Get all your documents checked for plagiarism or duplicacy with us.

essay

Essay Typer

Get different kinds of essays typed in minutes with clicks.

edit

GPA Calculator

Calculate your semester grades and cumulative GPa with our GPA Calculator.

referencing

Chemical Equation Balancer

Balance any chemical equation in minutes just by entering the formula.

calculator

Word Counter & Page Calculator

Calculate the number of words and number of pages of all your academic documents.

Refer Just 5 Friends to Earn More than $2000

Check your estimated earning as per your ability

1

1

1

Your Approx Earning

Live Review

Our Mission Client Satisfaction

hello I am very satisfied with the work you did for me. I will not hesitate to take your services again for future assignments, proudly recommend... please review your price for returning customers

flag

User Id: 457107 - 15 Jul 2020

Australia

student rating student rating student rating student rating student rating

Thanks to this expert in following closely on the assignment structure. Appreciated it :)

flag

User Id: 415901 - 15 Jul 2020

Australia

student rating student rating student rating student rating student rating

Great work! I am very pleased with my outcome. It was was easy to understand, yet consistent with the business quantitative method lingo in answering the questions.

flag

User Id: 383727 - 15 Jul 2020

Australia

student rating student rating student rating student rating student rating

thank you for the good work progress, really like how it\'s done and on time submitted to me

flag

User Id: 225590 - 15 Jul 2020

Australia

student rating student rating student rating student rating student rating
callback request mobile
Have any Query?