A newspaper headline asserts: "Falling Demand Pushes Down Housing Prices." This headline
A) incorrectly implies that the demand for housing can change, whereas in fact only the quantity of housing demanded can change.
B) incorrectly implies that the price of housing will rise when demand increases.
C) incorrectly implies that more housing will be demanded at higher prices.
D) correctly implies that a decrease in demand will decrease the market clearing price.

Question

Quizplus · Accepted Answer

The headline correctly implies that a decrease in demand will decrease the market clearing price. When the demand for housing falls, there will be less competition among buyers, leading to a lower price to clear the market. Option A is incorrect because although the demand for housing cannot change, the quantity of housing demanded can change due to factors such as changes in income or population. Option B is incorrect because an increase in demand will cause the price of housing to rise, not the other way around. Option C is incorrect because there is no guarantee that more housing will be demanded at higher prices as demand and price are inversely related.

A Newspaper Headline Asserts: "Falling Demand Pushes Down Housing Prices