Question

Based on your understanding of elasticity , which of the market do think has a higher elasticity of demand , buying a house or renting a house ? short paragraph

in your way no need to write in professional way

Answer 1

The elasticity of demand implies the degree of responsiveness of quantity demanded due to a percentage change in the price level, keeping other factors the same. Renting a house would have a higher elasticity than buying a house because any change in the rental price would affect the demand of the house in the short run like a week or a month. Whereas a change in the selling price of the house would have an impact in the longer period.

The majority of the consumer are residing in the rental accommodation, a unit change in the rental price would have a significant impact on the demand for the house. For instance, if the rent rises by 10% in Florida city then people would migrate to other regions immediately. On the other hand, the rise in the selling price of the house would have a gradual impact on the consumer because owning a house is very expensive. A 10% increase in the price would not result in an immediate change of decision as most of the houses are financed by banks. A rise in selling price would have a marginal impact on the monthly installment level.

Hence the market for house rental has a higher elasticity than the market for buying a house.