Question

Use the 4-quadrant diagram of a housing market equlibrium to explain what happens if there is a boom-bust cycle in housing demand supposing that the supply of new construction is unit elastic. How would your answer change if the elssricity of supply of new construction is lower (higher)?

UN 4. Use the 4-quadrant diagram of a housing market equilibrium to explain what happens if there is a boom-bust cycle in housing demand supposing that the supply of new construction is unit elastic. How would your answer change if the elasticity of supply of new construction is lower (higher)?

Answer 1

poge lot Anwe → Elasticity of supply measures the chance of responsiveness of quantity supplied to á change in own price of the commodity. it is also defined as the percentage change in quantity Supplied divied by percentage change inpoiceo -> the law of supply indicates the disection of change it price goes up supply will incaease But how much supply will rise în Jesponse to an increase in poice Cannet. be know from the low at supply. -> To Yuantity Such change we realise the Concept of elasticity of supply that measures the extent of quantities supplied in responese to a change in poice. market cauilibrium is a rasket State' where the supply in the market is equal to the demand in the market. -> the cardilibarium pace is the price of La good er scovice when the slepply of it is caral to the demand for it in the market

page ro a --> the supply and demand curves in lessece at and Q, which ace the equilibolum price and quantity → it's one thing to be able to identify the cauilibrium price on a graph, but you should also be Combostáble figuring out the police algebraically. Here are the supply and demand cusre formulas for this example: od=50-5p and QS = 5top - the supply cuore is deroled oxas, and the demand curve 28 denoted ex Qay they are both written as a function of pricee it you happen to get toomulas that are price as cunction of quantity