Assume there is a simultaneous increase in home foreclosures and a decrease in consumer incomes.

Based on this information we can conclude, with certainty, that in the market for used single-family homes equilibrium:

A) price will increase.

B) price will decrease.

C) quantity will increase.

D) quantity will decrease.

Question

Adriana

Business

18 January, 23:40

Assume there is a simultaneous increase in home foreclosures and a decrease in consumer incomes.

Based on this information we can conclude, with certainty, that in the market for used single-family homes equilibrium:

A) price will increase.

B) price will decrease.

C) quantity will increase.

D) quantity will decrease.

+5

Answers (1)

Know the Answer?

Zoie Richmond · Answer 1

Answer: B) price will decrease.

Explanation: increasing default in the payment of mortgages causes a corresponding increase in the number of foreclosures of homes. This maybe attributed to a decrease in the earnings of consumers. This means that there's a likelihood of more defaults, the demand for homes falls which drives down prices. Also, neighborhoods with high foreclosure numbers often see a drop of 1% in home value and quite often also, deserted homes fall into disrepair. Homes with no curb appeal and need significant repairs do not sell for market value. Therefore the prices will decrease.