The price of housing relative to the price of other goods is determined in the short run by the:
A) cost of construction.
B) demand for the services of homes.
C) supply of existing homes.
D) supply and demand for the existing stock of homes.

Question

Quizplus · Accepted Answer

The price of housing in the short run is determined by the supply and demand for the existing stock of homes. This means that factors such as changes in population, interest rates, and economic conditions that affect the demand for homes, as well as changes in the number of homes available for sale, will impact the price of housing. The cost of construction (A) may affect the long-run supply of housing, but not the short-run price of existing homes. The demand for the services of homes (B) is not directly related to the short-run price of housing. The supply of existing homes (C) does impact the short-run price of housing, but only as part of the supply and demand dynamic.

The Price of Housing Relative to the Price of Other