Economics

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Introduction
Economics: On April 26, 2015, the leadership of labor party mentioned that they will introduce rent control if they are able to form the government. They have taken this decision on the basis of a public poll; who may not have sound knowledge of economics. However, economists in the country believe that the policy is unsound economically as it can lead to inefficiencies in the market. It is generally well known that the competitive markets run efficiently when they are free from any price ceiling or price floor.

The price ceiling creates inefficiencies when it is set below the equilibrium price and the price floor creates inefficiencies when it is set above the equilibrium price. The rent control is a type of price ceiling below the equilibrium price because the government aims to control the rents within a specified range so it can lead to inefficiencies in the case of competitive markets Economics (Jehle and Reny, 2001). The effect of a price ceiling below the market equilibrium is shown in the figure below:

Figure 1 – Impact of Price Ceiling
(Source: Bade and Parkin, 2013)
The figure highlights that the price ceiling results in shortage of the good available in the market as demand increases at lower price and supply eventually decreases. The figure also shows that the markets become inefficient when such price ceilings are introduced in any given marketso if the government introduces policies for rent control then the results of such policies will be same (Bade and Parkin, 2013).
Market Structure of Housing Market
The nature and market structure of housing market is identical in almost every country; the industry is recognized by low barriers to entry and large number of firms operating in the industry. The industry is highly concentrated as a research reveals that top 100 real estate companies had a collective market share of 17% in USA in 2005. The results of this research clearly indicate that the housing market in USA is very competitive and highly concentrated; it…