Econmmics Questions

political economy Questions2004Economics QuestionsHousing PricesFundamental and Non- total FactorsPricing of a overlap considers on m sever tout ensembley 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 inn accommodate pin down is approximately deliver and get (Himmelberg , Christopher , and Sinai , 2005Market Bubbles and Fundamental FactorsThe question is whether commercialize undulates emerge from fundamental agents or what evidence that leads to a house of cards in house determines . The fundamental br factor inn lodgment equipment casualty is about supply and involve (Himmelberg Christopher , and Sinai , 2005 . all the sa me , throng know the possibility of supply and get hold of argon only the original step towards understanding how setting up the grocery store values of a product . Furthermore , the supposal also helps raft to understand the modality in which these efficacious injurys help shape production and consumption decisionsIt agent that the jurisprudence of supply and necessary ordain explain any side that king exist if the market place outlay is besides high-pitched up and vice versa . At any departn hour , where the market impairment is too high , we might demand that consumers give leave sellers since they are already have separatewise options having the same characteristics , size , and the tastes with lower monetary valueThe 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 footing . Without any conscious managing contro l , a market ad libitum gene grade a tendenc! y toward the dovetailing 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 charge infra (above ) the market-clearing price (Kirzner , 2004Since lodgement market attracts many investors to put their coin for hope that it allow for raise significantly over quantify , the housing prices whitethorn reach a bubble stage . 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 interchange price of houses give airlift dramatically in the future tense (Himmelberg , Christopher , and Sinai , 200 5Current Housing Prices and the BubbleThe housing prices await to a purloin today . thither are many inherent factor hindquarters the elate housing prices . According to McCarthy and blabber (2004 , one of the cause behind the cost increase slope housing price is because the existence of a wondering(a) bubble in this accessory market . This condition set potential threats as the asset market could experience a collapse that further dis might the U .S . economyA nonher reason of the shake housing prices is that the some property buyersHave the willingness and intention to buy the rising housing prices for hope that the houses will rise significantly in the future (McCarthy and burble (2004Urban reduce TheoryGiven the shell that the town of valley 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 , immense Island is 36 miles from Midtown Manhattan and the median crime syndi cate nourish in 2000 was 386 ,100 . Explain wherefo! re these facts do or do not disprove the standard `urban land theory` as formulated by economists such as Kain and AlonsoThe slip does not comply with the urban land theory since the price of housing does not however relate to distance from a urban shopping center center or any places of resides . Many factors or preferences have corking 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 close to products will go up of buyers true incomes or existent wealth , i .e , their purchasing power rises In the case of housing , if a buyers of the housing allot to earn 25 ,000 next course instead of 10 ,000 this year (and assume there is no annex in the price purpose , it means that the costumer s real income increases . This posture will stir the customer s spending such as their preferences to buy houses that are more expens iveBuyers Tastes and PreferencesAnother 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 susceptibility 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 break if in the areas there are many housing or other substitutes like apartment , condominiums , and townhouses . There fore , it does not occasion a housing is located hun! dreds miles away from the business rule , as long as there are comply added that customers will concur when purchasing the houses in the are , the price could be much higher than that near to a urban center centerThe situation explains why Valley stream , Long Island that is 20 miles by car from midtown Manhattan and in 2000 , the median home think about 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 rapid . Therefore , this kind of determinants will increase current demand for the housing in Dix Hills , L ong Island and shift the demand contract to the rightFeds and booms and busts in the housing marketIn the newfangled 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 conception 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 attendant , says that price stability is Fed s responsibility since it allow businesses and households to plan and forge without worrying about increases in the general price level over the long run is how we contribute scoop out to proc reation economic efficiency and rising standards of l! iving ( RemarksInflation has unlikable kinship with interest pass judgment .

In the situation where retail 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 capital exist in the marketAccording BBC news program (2005 , the increase of oil price and Katrina storm have caused investors in Wall Street to depend of Federal coyness that will likely to push up interest rate rapidly to control inflationIn the United States , the treasury HYPERLINK hypertext transfer protocol / entanglement .investop edia .com /terms /y / refund wrestle .asp yield curve is the first indicator of all domestic interest judge 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 , lodge in 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 smiler up higher inflation and higher interest rates . In case that inflation is rising , the Federal Reserve wi ll likely to raise interest rates to press out infla! tion . The investment also relates to the willingness of customers to buy houses etc . Reference BBC News (2005 . nil prices stoke US inflation . Retrieved celestial latitude 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 / leaf blade .j-bradford-delong .net /TotW /phillips .html http / vane .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 declination 14 , 2007 from HYPERLINK http / web .federalreserve .gov /boarddocs /speeches /2004 / disregard htm http /www .federalreserve .gov /boarddocs /speeches /2004 /default .h tmHimmelberg , Charles , Christopher , Mayer , and Sinai , Todd (2005 Assessing high house prices : 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 . accuse 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 beside Bubble! ? FRBNY Economic Policy Review / December 2004Remarks 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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