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Residential Housing Market during Recession

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Show the effect on the U.S. construction residential housing market in the event of severe economic recession. Draw diagram to illustrate the answer

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During a severe economic recession, consumers would focus on the basic necessities as food and clothing and not only residential houses. The effect on the ...

Solution Summary

The solution illustrates graphically the behavior of the residential housing during a recession.

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Supply and Demand Graphs.

For each of the following, draw a separate diagram for each of the following markets. Demonstrate what happens to the Supply and Demand graphs with your answer. Describe what happens to equilibrium price and quantity.
(Hint: Remember the difference in a change in demand [or supply] and a change in quantity demanded [or supplied]. Also, not every event requires a shifting of both curves - unless appropriate).
A. U.S. new construction residential housing market.
Event: A severe economic recession such as the country recently experienced reduces incomes nationwide.
B. U.S. air travel market.
Event: American Airlines unexpectedly folds (ceases operations) overnight.
C. The U.S. domestic car market.
Event: The price of foreign cars increases due to an exchange rate shock.
D. The market for large SUVs.
Event: A change in the price of gasoline in the U.S. rises by 33 cents each week for 6 consecutive weeks, then stabilizes at the new high price.

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