Housing prices in the UK are generally very high, particularly in certain areas of the country such as the South East. This makes it difficult for many people to be able to afford to buy their own houses. In England, average house prices are now almost 8 times the average worker's salary; in parts of the West Midlands, the high prices have been caused by demand growing faster than supply. Source: (Gillespie: 2019) Figure 7.1 below shows how market conditions have changed in the housing market. HOUSE PRICES P₂ P₁ S₁ $₂ ¡D₁ D₂ Q2 Q/ month Figure 7.1 market conditions and house prices Equilibrium has moved from P1Q1 to P2Q2. The most likely explanation for the changes shown is a a) Fall in mortgage interest rates and an increase in the number of houses built b) Fall in mortgage interest rates and a decrease in the number of houses built c) Rise in mortgage interest rates and an increase in the number of houses built d) Rises in mortgage interest rates and a decrease in the number of houses built.

Housing prices in the UK are generally very high, particularly in certain areas of the country such as the South East. This makes it difficult for many people to be able to afford to buy their own houses. In England, average house prices are now almost 8 times the average worker's salary; in parts of the West Midlands, the high prices have been caused by demand growing faster than supply. Source: (Gillespie: 2019) Figure 7.1 below shows how market conditions have changed in the housing market. HOUSE PRICES P₂ P₁ S₁ $₂ ¡D₁ D₂ Q2 Q/ month Figure 7.1 market conditions and house prices Equilibrium has moved from P1Q1 to P2Q2. The most likely explanation for the changes shown is a a) Fall in mortgage interest rates and an increase in the number of houses built b) Fall in mortgage interest rates and a decrease in the number of houses built c) Rise in mortgage interest rates and an increase in the number of houses built d) Rises in mortgage interest rates and a decrease in the number of houses built.

Macroeconomics: Principles and Policy (MindTap Course List)

13th Edition

ISBN:9781305280601

Author:William J. Baumol, Alan S. Blinder

Publisher:William J. Baumol, Alan S. Blinder

Chapter4: Supply And Demand: An Initial Look

Section: Chapter Questions

Problem 7DQ

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