A poll I asked in my PhD micro class today:

Suppose I introduce a price ceiling, like rent control. What will happen to the number of rental units?

In my class, people could pick one or more options

77% chose option 1
77% chose option 2
15% chose option 3

This was great for making a point

We had just been studying monopolies.

If the landlord is a monopolist and the price ceiling is binding, price will go down and the *number of rental units will increase*

(static model, linear pricing)

It was interesting that the students, even after just discussing monopolies, hadn’t considered this.

If there’s market power, rent control doesn’t necessarily reduce the number of units

There are number of results like this that are taught in intro econ courses that stick with students and carry policy discourse, and can be challenged with the same basic econ tools ...

Of course, if the model is instead a fully competitive market, you get a reduction in units. And a dynamic model is more complicated.

What will happen in practice is then an empirical question.

Last fall I taught intro micro in a program called PNAP, and used the Core Econ textbook Economy, Society, & Public Policy

The book seems less likely to lead students to simple conclusions by including market power from the start

It’s free online: http://core-econ.org 

For those interested, we did this example today:

inverse demand: P = 100 - Q
marginal cost: 25

We solved for competitive equilibrium, monopolist, and rent control of $75 and $50

Here you see under a monopolist, rent control of $50 lowers price and expands supply:

Yes we did this super basic example in my PhD class, and it was still useful

At the PhD level, we do so much calculus that we sometimes miss out on the intuition ...