Suppose that consumers begin to believe that the price of housing will be lower next period. What will happen in the market for housing as a result of these expectations?
A) Nothing will happen yet. Consumers will wait for the price to actually decrease before changing their behavior.
B) Demand for housing will increase, causing the price of housing to increase rather than fall.
C) Demand for housing will begin to fall, and the price of housing will decrease.
D) Demand for housing will begin to rise as investors believe they are getting a "deal."

Question

Quizplus · Accepted Answer

If consumers believe the price of housing will be lower next period, they are likely to hold off on purchasing a home until the price decreases. This decrease in demand will cause the price of housing to decrease in the current period.

Suppose That Consumers Begin to Believe That the Price of Housing