Supply and Demand Paper
A good that I have an experience in buying is a new house. One of the most important issues that prospective homebuyers should be aware of while looking to purchase a home is their area’s local real estate market condition. By understanding the different economic trends that a real estate market can be at; the prospective homebuyer will be able to buy a home for a price that gives an advantage. Although business cycles affect the purchase of a home in a number of ways, one of the biggest influences on a home’s price is the supply and demand in the local real estate market.
Supply and demand is a basic economic principal in which a product’s price is either positively or negatively affected by the availability of the product. Consequently, if there is a high demand for a product that is in low supply, the price of this product will escalate due to market conditions that will support a higher price. However, if there is low demand for a product that is in high supply, the price of this product will decrease due to the product’s abundance in the market. The birth of the homebuilding industry began when human beings achieved the skills to build hardened shelters, to provide comfort and protection for themselves as well as their families. Humanity devised a way to make an absolute necessity become absolutely profitable. When the first home was built for profit, no one could predict that having the ability to build a home would be so intricately tied to the economy. After all, homes are a necessity and, for this reason the price elasticity of demand for the home building industry is currently inelastic. History and time has shown that the need for homes will always exist. During times when the economy is thriving, the demand for homes will shift to the right because consumer confidence has increased. In 2001, the terrorist attack on September 11th significantly heightened uncertainty in...