Please apply demand and supply analysis to answer the following questions relate
ID: 1147582 • Letter: P
Question
Please apply demand and supply analysis to answer the following questions related to the U.S. real estate market:
a. What will be the impact on residential real estate market if the Fed raises the interest rate again in this year? Please state the leftward/rightward shift on either demand/supply curve and comment on the equilibrium price change.
b. If a price ceiling on real estate agency commission is limited at 1% only, what will be the impact on new market equilibrium price and quantity of residential real estate market? Please state the leftward/rightward shift on either demand/supply curve and comment on the equilibrium price change.
Explanation / Answer
A.When interest rate rises,investment falls.This is because the cost of borrowing to fund the investment rises.If investment will fall,the production will falls.Production will fall then supply will fall.Supply curve will shift to the left.Equilibrium price will rise.
B.Price ceiling of 1% will the commodity cheaper and raise its demand.Demand curve will shift to the right.Equilibrium price will rise.