10. ASSIGNMENT 9, continued In the short run. the general view of the relationship between housing supply and the price of housing is that the stock of housing is essentially xed and the supply of housing is very inelastic. This implies that in the short run. the price of housing will be determined by . while the quantity of housing will be determined by (I) demand conditions. supply conditions (2) supply conditions. economic conditions (3) income conditions. demand conditions (4) market price. supply conditions Consider a monocentric city in which all houses contain 1,300 square feet of oor space. and where the cost of commuting is $65 per kilometre per month. round trip. The price of housing is $1 per square foot at a distance of 10 kilometres from the city centre. What is the price of housing {per square foot) at the city-residential border? (1) $0.95 (2) $1.00 (3) $1.50 (4) $2.47 Housing is supplied by a competitive building industry. Builders construct housing at different locations and then sell or rent it to households. The selling price/rent they charge at a distance of 5 kilometres is p(5)= $1.85 per square foot. Every household in the city consists of 43 units of capital. 1,100 square feet of oor space. and 1,400 square feet of land. All buildings in this city are the same height. The price of capital is $5. In the long run. how much would a builder be willing to pay in land rent. r(d). for a piece of land they will build on, 5 kilometres from the city centre? (1) $1.00 per square foot (2) $1.07 per square foot (3) $1 .21 per square foot (4) $1.30 per square foot Why are residential bid rent functions convex? (1) The residential bid rent inction isconvex because householdscan substitute housing for other goods. (2) The residential bid rent function is convex because houses closer to the city centre rise in price much more quickly. (3) The residential bid rent function is convex because land price rises faster than lot size. (4) None of the above answers are correct. Houses have complex bundles of characteristics. Individual characteristics are not traded on a market and therefore do not have market prices. Hedonic pricing isolates the contribution of each characteristic by: (1) dividing the bundles by average income and then multiplying the number by the utility. (2) estimating the marginal value of each characteristic. (3) making all bundles of housing and other goods equal to the same utility. (4) all ofthe above. Assignment continues on the following page Copyright 2016 by the UBC Real Estate Division Lesson 9: Housing and Housing Mamets ASSIGNMENT 9, continued What are the implications of ltering for housing policy toward low-income families? (1) It may be better to let the market supply low-income families with used housing than to try to construct new housing. (2) Policies that encourage housing construction at higher levels may actually benet the poor by accelerating the ltering process. (3) Regulations that restrict the supply of housing in higher-income and higher-quality submarkets may have the effect of worsening housing conditions in lower-quality submarkets. since supply restrictions tend to raise prices. encourage housing maintenance and improvements. and thus discourage downward ltering. (4) All of the above statements are true
