Economics Issues in Real Life

Article:

vancouver-renters-union-forms-to-fight-soaring-costs-in-citys-housing-market

This article relates to what we are studying in Economics in several ways. It touches upon a common issue of rental properties, rent controls and supply and demand of housing.

Firstly, it is concerned with scarcity. Scarcity is a condition where there are not enough resources to meet everyone's needs and wants. People have a scarcity of money. They will have more demand for goods and services than they can afford. As a result of this, they will have to make choices. In this scenario, scarcity relates to the affordable housing. People refuse to leave their houses because no visible price ceiling was set (average rent cost was $1045 a month) and landlords will usually double or triple the rent after tenants move out. “When someone moves out the rents are jacked up two or three times higher, or beyond what people can afford,” said Pedersen. Moreover, in this article, there is also a scarcity of affordable units for people.

Secondly, strict price controls should be implemented. The government should do a better job educating landlords about their rights and the rights of the rentals - “Hutniak said the changes were needed as loopholes were increasingly abused by some landlords in recent years, tarnishing the industry.” Where rent controls are truly effective, there is generally little new construction going on, resulting in a shortage of apartments that persists and grows over time. There is no motivation for landlords to improve because the rate of return on housing investments falls in comparison to mortgages or condominiums. “Pedersen said there are better systems in Quebec or Prince Edward Island, where rent control applies to housing units, not people, so the cap remains in place when tenants change”

Lastly, I would like to say that the demand for rental housing is elastic. Quantity demanded is very responsive to even a little price change, therefore, a sensitivity of such a response creates elasticity.

This is a graphical representation of the price ceiling set below equilibrium point, which creates a shortage. In this situation, the government was inefficient in providing the incentives for landlords to lower the price.

This the representation of the elasticity of the demand, A small change in price leads to a big change in quantity demanded.