In Boston after World War II, the influx of returning veterans and the lack of new construction during the war and the previous depression meant that there was a serious shortage of housing.
1. Draw hypothetical supply and demand curves to represent the effect of the return of veterans on the market for apartments. What would you expect to happen to rents?
2. Whose income increased because of rising rents? Who lost income?
3. Show the effect of price controls setting a maximum rent. Whose income increased and who lost from these controls?
4. Read Real World Micro, chapter 2 especially Price Gouging: It's Just Supply and Demand by Marc Breslow. Why are producers sometimes able to make enormous profits from scarce commodities? Do you think there should be restrictions on price gouging? Do you think that price controls would cause significant inefficiency?
In Boston after World War II, the influx of returning veterans and the lack of new construction during the war and the previous depression meant that there was a serious shortage of housing.
1. Draw hypothetical supply and demand curves to represent the effect of the return of veterans on the market for apartments. What would you expect to happen to rents?
2. Whose income increased because of rising rents? Who lost income?
3. Show the effect of price controls setting a maximum rent. Whose income increased and who lost from these controls?
4. Read Real World Micro, chapter 2 especially Price Gouging: It's Just Supply and Demand by Marc Breslow. Why are producers sometimes able to make enormous profits from scarce commodities? Do you think there should be restrictions on price gouging? Do you think that price controls would cause significant inefficiency?
