Question

Suppose that owners of high-rise officebuildings are the main employers of custodial workers in acity. The city has decided to impose rent controls, and ithas established a rent ceiling below the previous equilibriumrental rate for offices throughout the city.a. How will the quantity ofoffices the building owners lease change?b. How will the market wage andequilibrium quantity of labor services provided by custodialworkers be affected by the imposition of rent controls?

Answer 1

Answer:

The answers are:

A) The quantity supplied of office buildings will decrease.

B) Both the market wage will fall and the equilibrium quantity of labor services will fall.

Explanation:

Price ceilings will always decrease the quantity supplied of the products or services that are offered in a market. No matter if the price is imposed for chocolate, cars, rent control, etc, quantity supplied always lowers since the price ceiling is set below the equilibrium price.

Since the price of rental offices will fall, the costs of office buildings will be adjusted, so logically the wages of custodial workers will decrease. Since the wages of custodial workers decrease, then the quantity supplied of custodial labor will also decrease.