Suppose the local real estate market is in equilibrium.A recession causes local household incomes to decline.At the same time,construction of a large subdivision of new homes has just been completed.Given these two changes and assuming that real estate is a normal good,we can predict that the price of real estate will _____ and the quantity of real estate bought and sold will _____.

Question

Quizplus · Accepted Answer

The decline in household incomes will decrease demand for real estate, while the completion of new homes increases supply. Both factors lead to a decrease in price, but the effect on quantity is uncertain as it depends on the relative magnitudes of the shifts in supply and demand.

Suppose the Local Real Estate Market Is in Equilibrium