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The demand for new homes in the United States is often described as highly cyclical and very sensitive to housing prices and interest rates. Given these characteristics, describe the effect of each of the following on the quantity demanded or the demand for new homes. Indicate whether the effect of each of the following is an upward or downward movement along a given demand curve or instead involves an outward or inward shift in the relevant demand curve for new homes.
. Explain your answers.
a. A decrease in the average price of new homes.
b. A fall in U.S. interest rates
c. A rise in the price of pre-owned homes.
d. A rise in the price of airline tickets.

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Solution Summary

Two variables of price are explained.

If we are considering the two variables of price (say, the Y axis with prices go up the axis from low to high and the quanitity of houses bought along the X axis with the maximum set at all new houses for sale) and interest rates (say, the Y axis with interest rates from 0 to higher), then we can answer the following questions in the following ways:

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If we are considering the two variables of price (say, the Y axis with prices go up the axis from low to high and the quanitity of houses bought along the X axis with the maximum set at all new houses for ...

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