Market Forces and Price Ceilings: A Classroom Experiment

Date

2005-01-01

Author

Kruse, Jamie Brown
Ozdemir, Ozlem
Özdemir, Özlem

Metadata

Show full item record

This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

Item Usage Stats

53
views

0
downloads

© 2005 Economics Network, University of Bristol.The effect of price controls on competitive equilibrium is a standard topic in many undergraduate economics courses. This classroom experiment demonstrates the effect of rent control (price ceilings) on the market for apartments. As participants in the experiment, students experience the effect of a price ceiling as buyers (renters) and sellers (landlords). The classroom-posted offer market exhibits a shortage under a binding price ceiling. Further, we explore a secondary response to rent control. When given the opportunity, landlords lower the quality of the apartments by reducing maintenance expenditures under the price ceiling, thus moving the market back to equilibrium. Since many students are themselves renters, they should relate to changes in quality due to lower maintenance by landlords. This experiment will stimulate discussion on market forces and on public policy aimed at restricting prices. In many cases rent control appears to be the most efficient technique presently known to destroy a city - except for bombing. (Lindbeck, 1972, p. 39)

URI

https://hdl.handle.net/11511/69772

Journal

International Review of Economics Education

DOI

https://doi.org/10.1016/s1477-3880(15)30130-4

Collections

Department of Business Administration, Article

Suggestions

OpenMETU
Core

Market Forces and Price Ceilings: A Classroom Experiment Özdemir, Özlem (2003-11-12) The effect of price controls on competitive equilibrium is a standard topic in many undergraduate economics courses. This classroom experiment demonstrates the effect of rent control (price ceilings) on the market for apartments. As participants in the experiment, students experience the effect of a price ceiling as buyers (renters) and sellers (landlords). The classroom-posted offer market exhibits a shortage under a binding price ceiling. Further, we explore a secondary response to rent control. When give...
The European Contribution To Institutional Economics: The Approach Of G. M. Hodgson Yılmaz, Ferudun (Orta Doğu Teknik Üniversitesi (Ankara, Turkey), 2001) Institutional economics is the leading heterodox school in economics. The other characteristic of the school is the ‘Americanness’ of its trajectory. But recent years have witnessed a transformation in the traditional boundaries of institutional economics. The school has opened its doors to European thoughts, and then the European wing of institutionalism has emerged. While European institutionalism suffered from heterogeneity of its theoretical content, it nonetheless has a potential to overcome the ‘isola...
The European Contribution To Institutional Economics: The Approach Of G. M. Hodgson Yılmaz, Ferudun (Orta Doğu Teknik Üniversitesi (Ankara, Turkey), 2001) Institutional economics is the leading heterodox school in economics. The other characteristic of the school is the ‘Americanness’ of its trajectory. But recent years have witnessed a transformation in the traditional boundaries of institutional economics. The school has opened its doors to European thoughts, and then the European wing of institutionalism has emerged. While European institutionalism suffered from heterogeneity of its theoretical content, it nonetheless has a potential to overcome the ‘isola...
Investment climate parameters in transition economies : the case of Russia Nikitin, Sergei; Özveren, Eyüp; Department of Economics (2003) This thesis incorporates institutional definition of the economies in transition into the economic analysis of the investment variable. Probability environment of the real world is another point of analysis. Decision-making framework is analyzed and incorporated into analysis as well. Thesis tries to answer questions such as: Why same projects are treated differently in different circumstances. Finally the Russian experience is investigated and used to prove hypothesis about investment climate parameters an...
Monetary Policy in The General Theory Ekinci, Nazım Kadri (Orta Doğu Teknik Üniversitesi (Ankara, Turkey), 2008-6) The theory of interest rate is central to Keynesian macroeconomics. This paper provides an interpretation of Keynes’ conventional theory of the interest rate. Accordingly, the interest rate can only be determined in the market, if expectations converge. The central bank is a market-maker, because of its capacity to manage expectations and to affect market outcomes. On the other hand, interest rate and asset prices determine the rate at which wealth is converted into income. This may be a crucial considerati...

Citation Formats

J. B. Kruse, O. Ozdemir, and Ö. Özdemir, “Market Forces and Price Ceilings: A Classroom Experiment,” International Review of Economics Education, pp. 73–86, 2005, Accessed: 00, 2020. [Online]. Available: https://hdl.handle.net/11511/69772.