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PRICE
QUANTITY
PRICE
QUANTITY
DI
PRICE
PRICE
QUANTITY
QUANTITY
PRICE
PRICE
QUANTITY
QUANTITY
DI
DI
D0
D0
Fig 1
Fig 1
Fig 2
Fig 2
INDUCTION ASSIGNMENT
ECONS 121
          QUESTION 1A
S0
S0

S1
S1

The diagrams above show the trends of house prices during the late 1980s and late 1990s as well as the early 2000s.
    Fig 1 shows the demand curve shift to left this is as a result of the increase in prices during those periods, and because the people were not able to afford them possibly due the stagnancy of their incomes.
Fig 2 shows the movement of the supply curve from left to right. This might be due to owner wanting to sell their house for more than what they bought for, getting rid of the negative equity.

     

                                                                                                           
 
QUESTION 1B

    Fig 3                                                                                                 Fig 4

                                    D1                                                                               S1             S0
QUANTITY
QUANTITY
                D0
QUANTITY
QUANTITY

From the diagram above we can see that in the early 1900s the demand for houses rose due to the low prices with demand curve shift from D0 to D1. While in Fig 4 it seen that due to fall in prices house owner refused to sell because they found out if they sold their houses during this periods they still wouldn’t be able to pay off their mortgages.

QUESTION 2

According to Geoff Riley, supply side refers to the factors affecting the quantity and quality of goods and services within an economy such as level of productivity or investment in research and development.
As there are factors on the demand side like income that affect the price of houses so are there factors on the supply side that affect the price of houses.
One of them is cost of construction of these houses, these...

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