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Suppose the Market for Standard One-Family Houses in a Canadian

Question 307

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Suppose the market for standard one-family houses in a Canadian city is described by the equations Qd=(165+IM)-2.5P, and Qs=-60+10P, where Q represents the number of houses demanded or supplied per year (in 10s), P represents the price in 10 000s, and IM is the number of families immigrating into the city during the year, in 10s.
a) What is the equilibrium number of houses and the equilibrium price if there were no immigration (IM=0)? Show this situation in a graph.
Now, suppose 350 families have immigrated within the year (IM=35).
b) Show this new situation on your graph.
c) What are the new equilibrium price and number of houses?
d) How many of the "old" families (non-immigrant) have lost their ability to buy a house?
e) By how much does the number of houses supplied increase?
f) How many of the newcomers buy a house? How could you change the demand equation if you knew that only about 10 percent of the immigrating families buy a house in the year of their arrival?

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a) The equilibrium price is given by the...

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