Without prices to provide information about relative scarcities, difficult and costly to acquire information. An example of a price ceiling , a law that sets a maximum price for an item. Usually enacted in response to unexpected increases in demand. A rise in demand increases price. No initial change in quantity, thus landlords profit at expense of tenants.
Rent controls are politically expedient.
Market effects of rent controls. Regulation holds price at P 0 . Shortage develops since quantity demanded at P 0 is Q 1 and quantity supplied is Q 0 . Demand price for Q 0 is P 1 . Indirect effects of rent controls.