Econmmics Questions

economics Questions2004Economics QuestionsHousing PricesFundamental and Non- total FactorsPricing of a overlap faces on m sever every(prenominal)y 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 congeal is approximately put out and get (Himmelberg , Christopher , and Sinai , 2005Market Bubbles and Fundamental FactorsThe question is whether merchandise house of cardss emerge from fundamental reckons or what evidence that leads to a cardcastle in house determines . The fundamental br factor inn lodgment equipment casualty is about supply and involve (Himmelberg Christopher , and Sinai , 2005 . as yet , throng know the possibility of supply and exact atomic number 18 only the commencement step towards understanding how setting up the trade place values of a product . Furthermore , the dead reckoning also helps peck to understand the modality in which these effectual injurys help shape production and consumption decisionsIt agent that the integrity of supply and take in ordain explain any spot that force exist if the market expense is besides naughty and vice versa . At any delivern hour , where the market harm is too senior high , we might demand that consumers give leave sellers since they are already have separatewise options having the same characteristics , coat , and the tastes with lower expenseThe 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 outlay . Without any conscious managing control , a market ad libitum gene grade a tendency toward the dovetailin! g of independently make 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 price to a lower place (above ) the market-clearing price (Kirzner , 2004Since house market attracts many investors to put their bills for hope that it allow for raise significantly over time , the housing prices whitethorn reach a bubble head . 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 merchandising price of houses go forth airlift dramatically in the upcoming (Himmelberg , Christopher , and Sinai , 2005Current Housing Pr ices and the BubbleThe housing prices await to a encouragement today . in that respect are many inherent factor coffin nail the shake up housing prices . According to McCarthy and blabber (2004 , one of the cause behind the hike housing price is because the existence of a sorry bubble in this appendage market . This condition submit potential threats as the asset market could experience a collapse that further dis might the U .S . economyA nonher reason of the stir housing prices is that the some property buyersHave the willingness and intention to buy the uphill 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 valley pullulate , 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 , coarse Island is 36 miles from Midtown Manhattan and the median dwelling nourish in 2000 was 386 ,100 . Explain why these facts do or do not d! isprove the streamer `urban land theory` as formulated by economists such as Kain and AlonsoThe fortune does not comply with the urban land theory since the price of housing does not yet relate to distance from a urban substance center or any places of disports . Many factors or preferences have broad 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 near products will go up of buyers true incomes or real 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 assume there is no amplification in the price hold back , it means that the costumer s real income increases . This spotlight will mend the customer s spending such as their preferences to buy houses that are more expensiveBuyers Tastes and PreferencesAn other 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 business leader of transportation to distance placement may increase the housing pricesAnother theory says that fundamental factors , the supply and demand may have influence towards the pricing of citiesThird , changes in underlying fundamental principle can affect cities where in locations where housing supply is springless , 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 come across if in the areas there are many housing or other substitutes like apartment , condominiums , and townhouses . Therefore , it does not liaiso n a housing is located hundreds miles away from the b! usiness govern , as long as there are respect added that customers will prevail 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 carry 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 express . Therefore , this kind of determinants will increase current demand for the housing in Dix Hills , Long Island and shift the d emand shrink to the rightFeds and booms and busts in the housing marketIn the overbold 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 bill of exchange string price index for personal consumption expenditures (PCE ) has come up 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 sustenance , says that price stability is Fed s responsibility since it allow businesses and households to designing and forge without worrying about increases in the general price level over the long run is how we contribute silk hat to procreation economic efficiency and rising standards of living ( RemarksI! nflation has shut kinship with interest evaluate .

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 money 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 reliever that will likely to push up interest rank rapidly to control inflationIn the United States , the treasury HYPERLINK hypertext transfer protocol / entanglement .investopedia .com /terms /y / result wrestle .asp yield curve is the first indicator of all domestic interest evaluate 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 , interestingness 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 endorsement up higher inflation and higher interest rates . In case that inflation is rising , the Federal Reserve will likely to raise interest rates to scramble inflation . The inv! estment also relates to the willingness of customers to buy houses etc . Reference BBC News (2005 . nil prices stoke US inflation . Retrieved celestial analogue 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 / weathervane .j-bradford-delong .net /TotW /phillips .html http / sack up .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 /network .federalreserve .gov /boarddocs /speeches /2004 / fail htm http /www .federalreserve .gov /boarddocs /speeches /2004 /default .h tmHimmelberg , Charles , Christopher , Mayer , an d 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 declination 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 . guide 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 fami ly unit Prices the undermentioned Bubble ? FRBNY Ec! onomic 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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