Price controls on rents are frequently implemented by governments in an effort to protect renters from high housing prices. Differentiate the type of price control used from other potential price controls, and then formulate reasons as to why governments should be careful when implementing these types of controls.

Price controls come in two forms, Price floors and Price ceilings.

Price Floors: Price floors are the minimum prices set for goods and services.

Price Ceilings: Price ceilings are the highest points at which goods and services can be sold.'

Reasons to be careful:

It can lead to shortages of housing, due to low pricesCould disrupt the system of supply and demand It can make contractors unmotivated to make new housing

Summary: Price controls may have some downsides but are a good option when quick fixes are needed to fix an inflated housing market. They help create affordable housing and prevent monopolies from forming and controlling housing prices.