Governments have, on many occasions, intervene in the market to establish a binding price…

Governments have, on many occasions, intervene in the market to establish a binding price ceiling. One such example was in Italy between 1945 to 1978 when the Italian Government legislated rent controls. (i) Why would the Italian Government have acted in this way? (1 mark) (ii) Describe the market for rental accommodation before and after the introduction of rent controls. (2 mark) One immediate consequence of the legislation was the development of a “Black Market”. (iii) How does a “Black Market” operate and who benefits or loses from its operation.

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Governments have, on many occasions, intervene in the market to establish a binding price ceiling. One such example was in Italy between 1945 to 1978 when the Italian Government legislated rent controls.
(i) Why would the Italian Government have acted in this way? (1 mark)
(ii) Describe the market for rental accommodation before and after the introduction of rent controls. (2 mark)
One immediate consequence of the legislation was the development of a “Black Market”.
(iii) How does a “Black Market” operate and who benefits or loses from its operation.
(2 mark)
(iv) What other problems arise with rent controls? Discuss two, one on the demand side and the other on the supply-side of the market
(4 mark)
(v) What non-price techniques of allocation could the government introduce to achieve
fairness, and
administrative efficiency in the now regulated rental market.
Discuss one of each in detail. (4 mark)
(vi) In the absence of a government method of allocation what options are open to the owner of the rental property (landlords) to choose a renter. Discuss 2 in detail..
(3 mark)
 
 
Governments resort to market price solutions by either subsidizing the renter or the landlord to achieve its objective,
vii) Describe how one of these methods operates and what advantage it has over the other technique. (2 mark)
 
Use diagram and discussion of the diagram to support your answer
Assignments require internet search on the topics covered in each question.

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