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    How construction is affected by the economy

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    In terms of home building and the construction industry, discuss how a current/past event has resulted in a change in price elasticity of supply and demand.

    Does it make public goods or common resources?

    In this industry, is price elasticity of demand though of as elastic or inelastic? Are there any available substitutes? Is it a luxury or necessity?

    What is the price elasticity of supply for your chosen industry?

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    Solution Preview

    A measure of consumers' sensitivity to price can be found with the price elasticity of demand. It measures the change in demand given a change in price. If a ten-percent drop in the price of a product produces a ten-percent increase in demand for the product, the price elasticity of demand is said to be one, or unity. A negative relationship between demand and price is expected, as higher prices lead to less demand. A good with a price elasticity lower than negative one is said to be "elastic;" it implies that demand is highly sensitive to changes in price. Goods with price elasticities closer to zero are said to be "inelastic." They tend to be things that are more essential to everyday living, and that have fewer substitutes. Similarly we can consider how price affects the behavior of sellers. If the price declines greatly, will they produce a lot less, or just a little less? This of course results in a positive number rather than ...

    Solution Summary

    How the construction industry is affected by the economy is discussed in this solution. The price elasticity of demand and price elasticity of supply for housing have been affected by major events in history, as seen in this answer, which is given in about 654 words.