souvik101990 wrote:
An industry analyst asserted in his recent report that the relative scarcity of housing in a particular market leads to larger than normal increases in price. During the late 1990s, according to the analyst's report, occupancy rates-a measure of the percentage of housing occupied at a given time-in crowded urban markets such as New York and San Francisco hovered around 99.5%. During the same period, housing prices increased by as much as 100% per year, compared to more normal past increases in the range of 5% to 15% per year. Which of the following is an assumption that supports the analyst's assertion?
A. In the housing market, there generally must be at least five buyers per seller in order to cause larger than normal increases in price.
B. Increases in demand often reflect an influx of new buyers into the marketplace or an unusual increase in buying power on the part of the customer.
C. The U.S. housing market showed a larger than average increase in the 1990s across the country, not just in crowded urban areas.
D. Price increases do not cause people to withhold their houses from the market in the hopes that prices will increase even further in the future.
E. A significant rise in housing prices in a specific area may cause some potential buyers to relocate to other, less pricey areas.
TOUGH question, it really makes you think.
A) not sure how this is relevant
B) this is simply a definition of demand. This does not help our argument.
C) We're talking about particular markets not the entire housing market.
D) CORRECT. The issue in the stem is whether it is truly a scarcity that is causing the price to increase. What if there wasn't a scarcity of housing and home owners were just unwilling to sell that caused the supply to drop and the price to increase? This answers that concern.
E) irrelevant