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Price Ceilings in the Housing Market

Effective price ceilings in the housing sector can only be realized if there is a balance in the whole sector. If a situation comes up where the price ceiling is deemed to be above the known market price, then will be no direct effect in the market (Clinard, 2012). If one, like in the housing sector, sets the price ceiling below the known market price, a state deemed as "shortage" is definitely created. At this instance it is considered that the quantity that people demand will obviously exceed the final quantity supplied. This means that the amount of goods and services that people require will never meet their demands. There is a shortage in the market that needs to be catered for in order to clear the crises in the market. For a scenario where the housing sector is involved, it means that the demand for the houses will be higher than the supply. This will in turn bring in issues such as congestion and slums can even emerge (Clinard, 2012).

This shortage may eventually be resolved in several ways. If it happens in general, one solution may present itself in a form of "queuing". This situation calls for people to keep on waiting in a given line in order to acquire the product. In the case for housing sector, it may even call for the case of survival for the fittest.  That scenario calls for benefit for those who are willing to keep on waiting in the line for the houses will eventually be considered. The housing sector always experiences many difficulties when it comes to price ceilings that are set in this industry. Struggle for the fittest which calls for scrambling for the available houses may also occur. This may lock out some people who are not economically endowed and those who may not have the vigor and courage to compete. This means that the given scenario is only favorable to those who are suited to face it. The old may only be locked out and also the physically challenged.

 

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Sellers, on the other hand, might end up providing the houses only to their family and also friends, or those people who are willing to go an extra mile to pay "under the table". Competition for scarce resources now set in as people try to settle for any housing that is available in order to survive. They may not have any other option rather than settling for any form of housing. Sellers therefore take advantage of the scenario in the market. They may end up being selective or even allow corruption to rule the sector (Grayson, 2010).

Another effect that may result from the price ceilings may be sellers eventually deciding to interfere with the quality of their goods sold. They may end up compromising the quality of the goods in order to suit the demands of the masses. Since people may only be willing to part with less money in order to purchase or even rent the houses, they may decide to offer lower quality houses at the market prices. This means that the materials used to build the houses will be of lower quality and hence the houses will not meet the habitable standards that are always called for by the government or housing authorities (Grayson, 2010).

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Economic Efficiency: considering Black versus Legal Markets

Legal systems always provide many benefits to any economic systems.

This sought economic efficiency is deemed to greatly occur when a given action tends to create more benefits in the sector than costs. It is evident that all legal systems will be out to help economic systems in a bid to become more efficient mainly by reducing the risks to all economics participants. Risk always represents a given cost that must always be compensated in a bid to achieve it by charging higher rates. In the housing sector, suppliers charge their clients more in order to meet their costs. This scenario may even call for compromising the quality of the houses in order to match the amount of money that those people are willing to pay.

Participants in any "black market system" always face an evident high risk of being victims of theft in their daily transactions and also being under exposure to many other forms of suppliers’ violence (Galbraith, 2011). For example, in the housing sector, unless the government intervenes, buyers will always receive poor quality goods whenever there are price ceilings in the market. The suppliers will never accept to face the extra costs and they must always make profit. This means that they will always pass the costs to the buyers and hence the latter end up losing in the whole market (Galbraith, 2011).

 

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