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Microeconomics Research
Microeconomic Research Assuming that supply remains the same.
Over the last several years, real estate prices have been going through periods of tremendous volatility. This is because the marketplace has shifted and there is a change in the underlying levels of demand. To fully understand what is taking place requires carefully examining an article from the New York Times. During this process, there will be a focus on: the utility derived from a specific product, the changes that occurred with demand, shifts in supply and if it is elastic / inelastic. These variables will provide specific insights which are showing the underlying strengths, weaknesses and potential causes impacting the markets. It is at this point, when greater amounts of clarity will be provided highlighting the long-term effects of these transformations.
Consider the utility derived from a product or service mentioned in the article.
The main utility derived from the product is the need for consumers to purchase and own a home. It is one of the main drivers of economic growth. Any changes in the market conditions will have a direct impact on the GDP rate. These variables are important, in discussing the challenges affecting housing from stagnant demand. This is occurring through highlighting the shifts, which are taking place and its long-term impacts. (Hauser, 2011) (Weicher, 2012)
The demand for housing has declined severely since 2008. This is when prices began to implode and buyers became scarce. However, since this time, the markets have been trying to steadily improve. This is occurring with the Federal Reserve keeping mortgage rates low and the U.S. government supporting efforts to encourage buyers to enter the markets. (Hauser, 2011) (Weicher, 2012)
The changes to demand and equilibrium are illustrating, how the sector has continued to be stagnant. This caused prices to remain low and it has prevented a recovery in most regions. The net effects are that if supply stays the same, home value will be sluggish for a while. These variables are keeping valuations much lower in contrast with the historical average. (Hauser, 2011) (Weicher, 2012)
Describe what has occurred to change the supply of the product or service and its market and equilibrium prices. Assuming that demand remains the same.
The supply of new homes has been rapidly increasing. This is because foreclosures are high. At the same time, the lack of demand and current levels of inventory is causing builders to scale back on their projects. These variables mean that average…
References
Hauser, C. (2011). Sales of new homes fell again in July. The New York Times. Retrieved from:
http://www.nytimes.com/2011/08/24/business/economy/sales-of-new-homes-in-us-fell-again-in-july.html?_r=0
Goodhart, C. (2007). House Prices and the Macro Economy. Oxford: Oxford University Press.
Weicher, J. (2012). Housing Policy at a Crossroads. Philadelphia, PA: Rowman and Littlefield.
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