Question 1 of 7

New housing in New Orleans is a(n) ____Normal____ (normal, inferior) good. How can you tell

from the general demand function?

Question 2 of 7

New housing and three-bedroom apartments are _____Substitutes_____ (substitutes,

complements) in New Orleans. How can you tell from the general demand function?

Question 3 of 7

If average monthly income is $1,300 and the monthly rental rate for three-bedroom

apartments is $800, then the demand function for new housing in New Orleans is Qd =

____25-3P+65-80___=10-3P____.

Question 4 of 7

If the average hourly wage rate for construction workers is $12 per hour and the average

rate of interest on loans to builders is 6 percent (i.e., PK = 6), then the supply function for

new housing is Qs = ____100+3P-60-48___= -8+3P_____.

Question 5 of 7

Now, lets sssume a new supply and demand curve: Qd = 150 + -2P and Qs = -10 + 2P. Solve

mathematically for equilibrium price and quantity.

PE = $ ............... per square foot. QE = ............

square feet per month (in 1,000s).

Question 6 of 7

Suppose New Orleans suffers a serious recession that causes average monthly income to

fall. If other things remain the same, what will happen to the demand for new housing?

Question 7 of 7

Suppose that the price of capital rises, causing an increase in supply. If other things remain

the same, what will happen to equilibrium quantity and price?