Econmmics Questions

economics Questions2004Economics QuestionsHousing PricesFundamental and Non- total FactorsPricing of a overlap plays on m sever bothy actors such(prenominal) as motives for the product and how excessive the product equals in the securities industry ( tack on Housing terms is influenced by `fundamental` and `non-fundamental` concomitantors . The fundamental means hostel accommodate bushel is approximately append and get (Himmelberg , Christopher , and Sinai , 2005Market Bubbles and Fundamental FactorsThe question is whether trade ripples emerge from fundamental ciphers or what evidence that leads to a tattle in house determines . The fundamental br factor inn lodgment equipment casualty is about supply and involve (Himmelberg Christopher , and Sinai , 2005 . all the same , throng know the possibility of supply and take in atomic number 18 only the setoff step towards understanding how setting up the mart values of a product . Furthermore , the surmisal also helps stack to understand the modality in which these healthy injurys help shape production and consumption decisionsIt agent that the truth of supply and contain ordain explain any mail service that efficacy exist if the commercialise monetary value is besides graduate(prenominal) and vice versa . At any move overn hour , where the market outlay is too postgraduate , we might demand that consumers give leave sellers since they atomic number 18 already have separatewise options having the same characteristics , sizing , and the tastes with lower tollThe supply-and-demand theory revolves around the marriage proposal that a free , competitive market does in fact successfully generate a force playful tendency toward the market-clearing harm . Without any conscious managing control , a market ad lib itum gene grade a tendency toward the doveta! iling of independently do decisions of misdirecters and sellers to ensure that each of their decisions fits with the decisions made by the other market participants . Were this tendency to be carried to the limit , no buyer (seller ) would be misled that it wastes time attempting to buy (sell ) at a wrong at a lower place (above ) the market-clearing price (Kirzner , 2004Since lodgment market attracts many investors to put their funds for hope that it allow for raise significantly over times , the housing prices whitethorn reach a bubble arrest . The raise in house prices is influenced by fundamental factors , the supply and demand . This makes have it off since the demand for having houses whitethorn be exploded when the bubble exist . By definition , bubble role occurs when housing price is high because buyers /investors predict that the selling price of houses get out airlift dramatically in the prox (Himmelberg , Christopher , and Sinai , 2005Current Housing Pri ces and the BubbleThe housing prices await to a climbing today . in that location are many inherent factor scum bag the excite housing prices . According to McCarthy and blabber (2004 , one of the cause behind the upgrade housing price is because the existence of a sorry bubble in this profit market . This condition ease up potential threats as the asset market could experience a collapse that further dis might the U .S . economyA nonher reason of the shake up housing prices is that the some property buyersHave the willingness and intention to buy the procession housing prices for hope that the houses will rise significantly in the future (McCarthy and blab out (2004Urban reduce TheoryGiven the shell that the town of vale blow , enormous Island is 20 miles by car from midtown Manhattan and in 2000 , the median spot survey was 199 ,800 . The town of Dix Hills , hanker Island is 36 miles from Midtown Manhattan and the median rest home nourish in 2000 was 386 ,100 . Explain wherefore these facts do or do not di! sprove the stock(a) `urban land theory` as formulated by economists such as Kain and AlonsoThe pillowcase does not comply with the urban land theory since the price of housing does not just now relate to distance from a urban decoct center or any places of lodge ins . Many factors or preferences have dandy impingements towards customers decision on buying housing that further influences the price as followingA Change in Buyers Incomes and WealthAccording to Howard society College , the demand for closely products will go up of buyers true incomes or unfeigned wealth , i .e , their purchasing power rises In the case of housing , if a buyers of the housing allot to earn 25 ,000 next class instead of 10 ,000 this year (and presumptuous there is no accession in the price organize , it means that the costumer s real income increases . This post will sham the customer s spending such as their preferences to buy houses that are more expensiveBuyers Tastes and Pref erencesAnother factor that influences the demand for a product is buyers tastes and preferences . In case of housing , the existence of emotional benefits such as good neighborhood or areas where there are celebrities will raise the price of housing in the areas . In addition , the avail tycoon of transportation to distance placement whitethorn increase the housing pricesAnother theory says that fundamental factors , the supply and demand whitethorn have influence towards the pricing of citiesThird , changes in underlying rudiments can affect cities where in locations where housing supply is inelastic , prices tend to be higher relation back to rents (McCarthy and Peach , 2004The Prices of Related Products or ServicesIn the housing case of Valley stream , Long Island and Dix Hills , Long Island , the difference of pricing may meet if in the areas there are many housing or other substitutes like apartment , condominiums , and townhouses . Therefore , it does not progeny a housi ng is located hundreds miles away from the business ! regularize , as long as there are watch added that customers will encounter when purchasing the houses in the are , the price could be much higher than that near to a city centerThe situation explains why Valley stream , Long Island that is 20 miles by car from midtown Manhattan and in 2000 , the median home contain was 199 ,800 is priced lower than town of Dix Hills , Long Island is 36 miles from Midtown Manhattan and the median home value in 2000 was 386 ,100Buyers Expectation of the Product s Future PriceThis factor will play a role when , for instance , Dix Hills , Long Island announces that the price of their houses will increase next month or year since there will be a obtain centers of any place of interests that located near to the housing . This situation will drive consumers to buy the houses in Dix Hills , Long Island scurrying . Therefore , this kind of determinants will increase current demand for the housing in Dix Hills , Long Island and shift the demand f lex to the rightFeds and booms and busts in the housing marketIn the tender York Times column of may 27 , 2005 economist Paul Krugman wrote : After all , the Feds ability to manage the economy managing comes from its ability to create booms and busts in the housing marketIn 2004 , pretension had picked up and had raised questions in the minds of some people about whether it might be on a rising trend that poses a risk to price stability . the selective service string price index for personal consumption expenditures (PCE ) has move from 1 .4 percent over the twelve months of last year to an yearly rate of 3 .0 percent over the first quadruplet months of 2004Donald L . Kohn , a Governor of the federal fireman , says that price stability is Fed s responsibility since it allow businesses and households to architectural plan and forge without worrying about increases in the general price level over the long run is how we contribute beat to procreation economic efficiency a nd rising standards of living ( RemarksInflation has ! disagreeable kinship with interest rate .

In the situation where sell prices experience a significant increase , people might transport that interest rate will rise as well(p) . The reason is that government try to control the amount of notes exist in the marketAccording BBC news (2005 , the increase of oil price and Katrina storm have caused investors in Wall Street to depend of Federal maintain that will likely to push up interest rate rapidly to control inflationIn the United States , the exchequer HYPERLINK hypertext transfer protocol / entanglement .investopedia .com /terms /y / accede wrestle .asp yi eld curve is the first indicator of all domestic interest grade and it influence global rates setting . Therefore , in the U .S , interest rates on all other domestic bond categories rise and fall with HYPERLINK hypertext transfer protocol / entanglement .investopedia .com /terms /u /ustreasury .asp Treasuries yield Below is the figure explaining the impact of inflation and interest rates on the YieldFigure 1 family between Inflation , come to Rates and YieldSource : BBC News (2005 . elan vital prices stoke US inflation . Retrieved October 30 , 2005 fromhypertext transfer protocol /news .bbc .co .uk /2 /hi /business /4342456 .stmIn case of investment , investors demand that Investors demand more yield as bond maturity extends (as shown in the figure . The reason is that investors hope that the increasing returns will gull up higher inflation and higher interest rates . In case that inflation is rising , the Federal Reserve will likely to raise interest rates to disturb inf lation . The investment also relates to the willingne! ss of customers to buy houses etc . Reference BBC News (2005 . nil prices stoke US inflation . Retrieved celestial analog 16 , 2007 from http /news .bbc .co .uk /2 /hi /business /4342456 .stmCase , Karl E clean-living , Ray C . 1999 , Principles of Economics , New jersey scholar HallDeLong , J . Bradford (2000 . What Happened to the Phillips Curve Retrieved declination 14 , 2007 from HYPERLINK http / brand .j-bradford-delong .net /TotW /phillips .html http / net .j-bradford-delong .net /TotW /phillips .htmlEconomic Growth . Retrieved celestial latitude 14 , 2007 from web .nps .navy .mil brgates /documents / macronotes /growth .rtfFederal Reserve (2004 . Remarks by Governor Donald L . Kohn . Retrieved celestial latitude 14 , 2007 from HYPERLINK http / vane .federalreserve .gov /boarddocs /speeches /2004 / scorn htm http /www .federalreserve .gov /boarddocs /speeches /2004 /default .h tmHimmelberg , Charles , Christopher , Mayer , and Sinai , Todd (2005 Assessing high house pr ices : bubbles , fundamentals , and misperceptions Federal Reserve Bank of New York Staff Reports , no . 218Keynesian Theory of Economics . Retrieved celestial latitude 14 , 2007 from HYPERLINK http /interzone .com cheung / meaning .dir /econthyk1 .html http /interzone .com cheung /SUM .dir /econthyk1 .htmlKirzner , Israel (2004 . The Law of Supply and Demand . Retrieved declination 14 , 2007 from HYPERLINK http /www .libertyhaven .com /theoreticalorphilosophicalissues /supplyside economics /lawsupply .shtml http /www .libertyhaven .com /theoreticalorphilosophicalissues /supplysidee conomics /lawsupply .shtmlLansing , Kevin J (2002 . fling word the Phillips Curve Help Forecast Inflation ? Retrieved December 14 , 2007 from HYPERLINK http /www .frbsf .org /publications /economics /letter /2002 /el2002-29 .html http /www .frbsf .org /publications /economics /letter /2002 /el2002-29 .htmlMcCarthy , Jonathan and Peach , Richard W (2004 . Are family unit Prices the conterminous Bubb le ? FRBNY Economic Policy Review / December 2004Rema! rks by Governor Donald L . Kohn (2004 . Retrieved December 16 , 2007 from http /www .federalreserve .gov /boarddocs /speeches /2004 /default .h tmRichard Voith (2000 . Has Suburbanization Diminished the Importance of Access to nub City ? Federal Reserve Bank of PhiladelphiaSupply and Demand . Retrieved December 14 , 2007 from HYPERLINK http /www .howardcc .edu /social_science /micropdf /2-jb .pdf www .howardcc .edu /social_science /micropdf /2-jb .pdfEconomicsPage PAGE 3PAGEDEC . 15 , 2007 ...If you want to get a full essay, order it on our website: OrderCustomPaper.com

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