Supply and Demand Paper

Supply and Demand Paper

I have chosen to write about the purchase of a new home for this paper. For most people, buying a home is one of the biggest things they do in their lives. The purchase of a home is something that takes careful consideration and thought. Most first-time home buyers do not realize how many factors go into determining the price of a house. There are so many more things involved than just the asking price. Closing costs, title related costs, and insurance are only a few of the factors that go into the final price of a house. One very important thing that affects the price of homes is supply and demand. Many people would say, “What do you mean? There are always people looking for houses and there are always houses for sales.” That is true; there are almost always houses for sale in any city across America. However, the supply of houses for sale does change as does the demand.

There are many factors that play a part in determining the supply and demand of houses. One of the major factors is the U.S. economy. When the economy is in good shape people make more money. When people make more money they are willing to spend more money. This increases the demand for houses. When the demand for houses goes up the price of houses goes up. When the price goes up, it is more attractive for people to sell, thereby increasing supply. The cost of building materials is also a determinant. When building materials rise in price, house prices go up. When house prices go up, people tend to wait to purchase; this decreases demand. High building material prices make builders build fewer houses; this decreases supply.

Substitutes are goods that can take the place of a certain product. When the demand for a product is high, the demand for substitutes for that product is usually low. When the demand for a product is low, the demand for substitutes is high. There are substitutes for buying a house. Not everyone wants the responsibility of owning a home. Many people...