Homework Help is Here – Start Your Trial Now!
Business
Economics
Assume that the housing market is in equilibrium in year 1. In year 2, the mortgage rate that banks charge consumers decreases, but producers are not affected. Which of the following is most likely to be the equilibrium change? a The equilibrium will be at point C before the change in expectations and point A after the change b The equilibrium will be at point A before the change in expectations and point B after the change c The equilibrium will be at point A before the change in expectations and point C after the change d The equilibrium will be at point E before the change in expectations and point C after the change

Assume that the housing market is in equilibrium in year 1. In year 2, the mortgage rate that banks charge consumers decreases, but producers are not affected. Which of the following is most likely to be the equilibrium change? a The equilibrium will be at point C before the change in expectations and point A after the change b The equilibrium will be at point A before the change in expectations and point B after the change c The equilibrium will be at point A before the change in expectations and point C after the change d The equilibrium will be at point E before the change in expectations and point C after the change

icon
Related questions
Question

Assume that the housing market is in equilibrium in year 1. In year 2, the mortgage rate that banks charge consumers decreases, but producers are not affected. Which of the following is most likely to be the equilibrium change?

 

a

The equilibrium will be at point C before the change in expectations and point A after the change

b

The equilibrium will be at point A before the change in expectations and point B after the change

c

The equilibrium will be at point A before the change in expectations and point C after the change

d

The equilibrium will be at point E before the change in expectations and point C after the change

### Demand and Supply Analysis This graph is a representation of the interaction between demand and supply in a market. It shows how equilibrium price and quantity are established. The axes are labeled "Price" (vertical axis) and "Quantity" (horizontal axis). #### Notations and Elements: 1. **Demand Curve (D)**: This downward-sloping curve represents the quantity of a good consumers are willing and able to purchase at various prices. The lower segment is labeled as \( \overline{D} \) showing a shift in demand. 2. **Supply Curve (S)**: This upward-sloping curve represents the quantity of a good producers are willing and able to sell at various prices. The upper segment is labeled as \( \overline{S} \), showing a shift in supply. 3. **Equilibrium Points**: - Point A: The initial equilibrium where the original demand curve \(D\) intersects with the original supply curve \(S\). - Point B: A new equilibrium point formed when the shifted supply curve \( \overline{S} \) intersects the original demand curve \(D\). - Point C: Another equilibrium point where the shifted demand curve \( \overline{D} \) intersects the original supply curve \(S\). - Point E: The equilibrium of the shifted demand curve \( \overline{D} \) intersecting the shifted supply curve \( \overline{S} \). #### Understanding the Shifts: - **Shift in Demand Curve**: - From \(D\) to \( \overline{D} \): This shift indicates a change in demand due to factors other than price, like consumer preferences, income, or prices of related goods. - **Shift in Supply Curve**: - From \(S\) to \( \overline{S} \): This shift represents a change in supply due to factors other than price, such as production costs or technological improvements. #### Conclusion: The interaction of the demand and supply curves demonstrates how market equilibrium is determined and how shifts in these curves affect the equilibrium price and quantity. Understanding these concepts helps in analyzing how various factors influence the market dynamics.
Transcribed Image Text:### Demand and Supply Analysis This graph is a representation of the interaction between demand and supply in a market. It shows how equilibrium price and quantity are established. The axes are labeled "Price" (vertical axis) and "Quantity" (horizontal axis). #### Notations and Elements: 1. **Demand Curve (D)**: This downward-sloping curve represents the quantity of a good consumers are willing and able to purchase at various prices. The lower segment is labeled as \( \overline{D} \) showing a shift in demand. 2. **Supply Curve (S)**: This upward-sloping curve represents the quantity of a good producers are willing and able to sell at various prices. The upper segment is labeled as \( \overline{S} \), showing a shift in supply. 3. **Equilibrium Points**: - Point A: The initial equilibrium where the original demand curve \(D\) intersects with the original supply curve \(S\). - Point B: A new equilibrium point formed when the shifted supply curve \( \overline{S} \) intersects the original demand curve \(D\). - Point C: Another equilibrium point where the shifted demand curve \( \overline{D} \) intersects the original supply curve \(S\). - Point E: The equilibrium of the shifted demand curve \( \overline{D} \) intersecting the shifted supply curve \( \overline{S} \). #### Understanding the Shifts: - **Shift in Demand Curve**: - From \(D\) to \( \overline{D} \): This shift indicates a change in demand due to factors other than price, like consumer preferences, income, or prices of related goods. - **Shift in Supply Curve**: - From \(S\) to \( \overline{S} \): This shift represents a change in supply due to factors other than price, such as production costs or technological improvements. #### Conclusion: The interaction of the demand and supply curves demonstrates how market equilibrium is determined and how shifts in these curves affect the equilibrium price and quantity. Understanding these concepts helps in analyzing how various factors influence the market dynamics.
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Cobweb Model
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.