Effects of Supply and Demand

In: Business and Management

Submitted By noahjo05
Words 758
Pages 4
The decision to purchase a new home is a major decision and should not be taken lightly. When using the term new home, we will consider new, site built homes. When one considers that this home will more than likely be the dwelling place for the buyer for the remainder of their life, it places even more significance on the decision. There are many things that should be considered and many things than can affect that decision before a final choice is made. One of the first considerations when deciding to purchase a new home is the cost and how that cost will affect the supply and demand for new homes. The higher the cost of new homes, the lower the demand for new homes will be. Factors that affect the cost would be the number of sellers and the number of buyers. The greater the number of sellers of new homes in a neighborhood, the lower the cost of a new home in that neighborhood. If there are numerous sites for new houses for sale in a neighbor of relative size and features, due to competition, the lower the cost of a new home will be. This follows the law of supply and demand. If there are a limited number of sites available and numerous buyers seeking a new home in the neighborhood, the higher the cost will be. Each potential buyer would be willing to pay a higher cost to obtain the house of their choice. This also follows the law of supply and demand. When the supply of a good rises (falls), the cost for that good falls (rises). When the demand for a good rises (falls), the cost of that good rises (falls).
Another factor that can affect the supply and demand is the economy. The economy can affect both the supply and the demand for new homes. When the economy is down, the costs for new homes will drop. This will affect the supply since most builders will not want to build new homes at the lower cost. As the economy improves, so will income. This…...

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