Housing Supply and Demand

Essay by FrogmenUniversity, Bachelor'sB+, January 2008

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Housing Supply and DemandThere are two factors needed for a market to exist. These factors are buyers and sellers. The buyers and sellers of the housing market have a voluntary exchange of a house and/or property where the outcome will produce a conclusion where the buyer and the seller are both better off as a result of their exchange. Does this one transaction affecting the buyer and the seller have an equal outcome for a third party, with this third party being society, whether the outcome is good or bad? When society is affected by the outcome of the market it is called supply and demand. Demand is the buyers or consumers willingness to buy a product and the price in which they are willing to pay for that product, whereas, the supply is how much of the product is available to the buyer (O'Sullivan & Sheffrin, 2006). In this case the amount of housing is the supply, and the need of housing by the buyers is the demand.

The supply of housing affects the demand and vise versa.

When the housing market has equilibrium then the quantity of the product demanded equals the quantity of the product being supplied (Mandel & Coy, 2007). When a market does not have equilibrium then it has been affected by determinants, or things that can influence or affect a product. Some determinants in the housing market are the increase or decrease of population and consumers, the income of the consumers, prices of the related goods, consumer preferences, and consumer expectations (O'Sullivan & Sheffrin, 2006). If the population of an area decreases the prices of the houses will also decrease because the supply will then outweigh the demand. If the population of an area increases then the price will also increase because demand will...