remains in the rental market, landlords tend to spend less on maintenance and on essentials like heating,

cooling, hot water, and lighting. The first rule of economics is you do not get something for nothing—everything

has an opportunity cost. Thus, if renters obtain “cheaper” housing than the market requires, they tend to also

end up with lower quality housing.

Price ceilings are enacted in an attempt to keep prices low for those who need the product. However, when the

market price is not allowed to rise to the equilibrium level, quantity demanded exceeds quantity supplied, and

thus a shortage occurs. Those who manage to purchase the product at the lower price given by the price ceiling

will benefit, but sellers of the product will suffer, along with those who are not able to purchase the product at

all. Quality is also likely to deteriorate.

Access for free at openstax.org
3.4 • Price Ceilings and Price Floors 73

Price Floors
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