1. Supply and Demand: Single and Multiple Changes in the Market for Homes
Part II: Possible Student Solutions
W. Edward Chi
Figure I: Large increase in Demand #1, Small decrease in Supply #2, Small decrease in Demand #3. Overall, equilibrium price rises, equilibrium quantity rises.
Figure II: Large increase in Demand #1, Large decrease in Supply #2, Large decrease in Demand #3. Overall, equilibrium price rises, equilibrium quantity falls.
S#2 inc. prod. costs
S#2 inc. prod. costs
PEafter S0
PEafter S0
PE0
D#1 inc. income
Price of a Home
PE0
D#1 inc. income
D#3 inc. compl. price
Price of a Home D0
D#3 inc. compl. price D0
QE0
QEafter
QE0
QEafter
Quantity of homes
Quantity of homes
Figure III: Large increase in Demand #1, Large decrease in Supply #2, VERY large decrease in Demand #3. Overall, equilibrium price falls, equilibrium quantity falls.
S#2 inc. prod. costs S0
PE0
Price of a Home
PEafter
D#1 inc. income D0
D#3 inc. compl. price
QE0
QEafter
Quantity of homes