Suppose the government decides that every family should own its own home.To bring this about,the government decides to subsidize the home-construction industry by giving the home-construction companies $10,000 for every house that they build.As a result of this,
A) the supply curve of new houses would shift leftward,since it now costs $10,000 more for builders to produce a house.
B) the demand curve for new houses would shift rightward,since now every family would want to buy a house.
C) the demand curve for new houses would shift leftward.
D) the supply curve of new houses would shift rightward,since builders would be willing to produce and sell more houses at each given price.
E) c and d

Question

Quizplus · Accepted Answer

By providing a subsidy for home-construction, the government is giving an incentive for builders to produce more homes. This will result in a rightward shift in the supply curve of new houses as builders will be willing and able to produce and sell more homes at each given price. The demand curve for homes may or may not shift, depending on whether or not every family can afford to buy a home even with the subsidy in place.

Suppose the Government Decides That Every Family Should Own Its