Government intervention can lead to unintended consequences
When governments try to fix a problem in a market, their policy can accidentally create new problems they never planned for. These side-effects are called unintended consequences.
Real World
When New York City imposed strict rent controls in the 1970s, landlords responded by converting apartments into offices or letting them deteriorate, actually reducing the supply of affordable housing rather than increasing it.
Exam Focus
Always identify who bears the unintended consequence and use a diagram showing the knock-on shift in supply or demand for full evaluation marks.
Price Elasticity of Demand
PED = % change in quantity demanded ÷ % change in price
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