Exercise Tax
Can be levied on either the buyers or sellers
Tax Incidence
Division of the tax between buyers and sellers
Housing=
Stock Variable
Stock Variable Define
a quantity at a moment in time
Housing Market:
Flow Variable
Process over period of time
Housing Market:
Supply of housing
Measures the total number of homes in a market. That are available for ownership at a particular point
in time. - Housing Stock
Housing Market:
Demand for housing
number of homes in a market that people would like to own at each price in a set of prices at a point in
time, given the constraints they face.
Demand Curve for Housing
A curve showing the demand for housing
, Why a rapid increase in housing prices?
1. Economic Growth
2. Low Interests Rate
3. Government policies => Tax code
4. Financial Innovations
-Adjustable rate mortgage
-Mortgage backed securities
5. Relaxed lending standards
6. Speculation
Reasons for the Great recession?
-Rising unemployment and falling income
-Falling income and falling wealth
-Tightened lending standards
Elasticity
response from one economic variable to another
Elastic Demand
ED>1.0: Cost more than 1.0
Inelastic Demand
ED<1.0 Cost less than 1.0
Unit Elastic Demand
ED=1.0
Perfectly Elastic Demand
Horizontal Demand Curve, approaching infinity
Can be levied on either the buyers or sellers
Tax Incidence
Division of the tax between buyers and sellers
Housing=
Stock Variable
Stock Variable Define
a quantity at a moment in time
Housing Market:
Flow Variable
Process over period of time
Housing Market:
Supply of housing
Measures the total number of homes in a market. That are available for ownership at a particular point
in time. - Housing Stock
Housing Market:
Demand for housing
number of homes in a market that people would like to own at each price in a set of prices at a point in
time, given the constraints they face.
Demand Curve for Housing
A curve showing the demand for housing
, Why a rapid increase in housing prices?
1. Economic Growth
2. Low Interests Rate
3. Government policies => Tax code
4. Financial Innovations
-Adjustable rate mortgage
-Mortgage backed securities
5. Relaxed lending standards
6. Speculation
Reasons for the Great recession?
-Rising unemployment and falling income
-Falling income and falling wealth
-Tightened lending standards
Elasticity
response from one economic variable to another
Elastic Demand
ED>1.0: Cost more than 1.0
Inelastic Demand
ED<1.0 Cost less than 1.0
Unit Elastic Demand
ED=1.0
Perfectly Elastic Demand
Horizontal Demand Curve, approaching infinity
