Assume that the housing market is in equilibrium in year 1. In year 2, the mortgage rate that banks charge consumers increases, but producers are not affected. Which of the following is most likely to be the equilibrium change? aThe equilibrium will be at point C before the change in expectations and point A after the changebThe equilibrium will be at point A before the change in expectations and point B after the changecThe equilibrium will be at point A before the change in expectations and point C after the changedThe equilibrium will be at point E before the change in expectations and point C after the change This image displays a supply and demand graph used to illustrate economic equilibrium. The x-axis represents quantity, while the y-axis represents price. There are two demand curves and two supply curves:1. **Demand Curves**: - The original demand curve, labeled \( \overline{D} \), slopes downwards from left to right. - The new demand curve, labeled \( \triangle D \), is positioned to the right, indicating an increase in demand.2. **Supply Curves**: - The original supply curve, labeled \( \overline{S} \), slopes upwards from left to right. - The new supply curve, labeled \( \triangle S \), is positioned to the right, indicating an increase in supply.3. **Equilibrium Points**: - Point E is the original equilibrium where \( \overline{S} \) intersects \( \overline{D} \). - Point A is the new equilibrium where the new supply curve \( \triangle S \) intersects the new demand curve \( \triangle D \). - Points B and C are intermediate intersections of the supply and demand curves used to show shifts in equilibrium over time.This graph effectively demonstrates how shifts in supply and demand affect market equilibrium price and quantity.

The demand curve is the downward-sloping curve. The supply curve is the upward-sloping curve. The…

Answered: Assume that the housing market is in…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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

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

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

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

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

This image displays a supply and demand graph used to illustrate economic equilibrium. The x-axis represents quantity, while the y-axis represents price. There are two demand curves and two supply curves:

1. **Demand Curves**:
- The original demand curve, labeled \( \overline{D} \), slopes downwards from left to right.
- The new demand curve, labeled \( \triangle D \), is positioned to the right, indicating an increase in demand.

2. **Supply Curves**:
- The original supply curve, labeled \( \overline{S} \), slopes upwards from left to right.
- The new supply curve, labeled \( \triangle S \), is positioned to the right, indicating an increase in supply.

3. **Equilibrium Points**:
- Point E is the original equilibrium where \( \overline{S} \) intersects \( \overline{D} \).
- Point A is the new equilibrium where the new supply curve \( \triangle S \) intersects the new demand curve \( \triangle D \).
- Points B and C are intermediate intersections of the supply and demand curves used to show shifts in equilibrium over time.

This graph effectively demonstrates how shifts in supply and demand affect market equilibrium price and quantity.

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