Suppose a small town in an isolated rural area has a housing market that is in equilibrium. Next, suppose that a newly discovered shale formation near the town causes an influx of people into the town in order to produce oil and gas from the formation. First: What do you expect to happen in the housing market if the market is allowed to adapt naturally to the new market conditions? Second: What would happen if the town's authorities passed a law to keep the price of housing from rising above the original equilibrium price?

1 / 1 point STEP 1: How will the demand curve or the supply curve shift? Demand increases (demand curve shifts right) Demand decreases (demand curve shifts left). Supply increases (supply curve shifts right). Supply decreases (supply curve shifts left). (response not displayed) 2 1 / 1 point STEP 2: Which rule explains the reason for the curve shift you selected in step # 1? Change in income. O Change in the price of a related good. Change in consumer expectations. Change in consumer tastes or preferences. Change in transactions costs (demand side). Change in population. Change in the price of an input required for production. Change in technology. Change in government regulation or taxation. Change in transaction costs (supply side). Change in the number of producers/firms. (response not displayed) 3 / 1 point STEP 3: Based on demand or supply curve shift you selected, what type of market imbalance will result? Shortage1 / 1 point STEP 1: How will the demand curve or the supply curve shift? Demand increases (demand curve shifts right) Demand decreases (demand curve shifts left). Supply increases (supply curve shifts right). Supply decreases (supply curve shifts left). (response not displayed) 2 1 / 1 point STEP 2: Which rule explains the reason for the curve shift you selected in step # 1? Change in income. O Change in the price of a related good. Change in consumer expectations. Change in consumer tastes or preferences. Change in transactions costs (demand side). Change in population. Change in the price of an input required for production. Change in technology. Change in government regulation or taxation. Change in transaction costs (supply side). Change in the number of producers/firms. (response not displayed) 3 / 1 point STEP 3: Based on demand or supply curve shift you selected, what type of market imbalance will result? Shortage3 0 / 1 point STEP 3: Based on demand or supply curve shift you selected, what type of market imbalance will result? Shortage Surplus Fo (response not displayed) 4 / 1 point STEP 4: Based on the type of market imbalance you selected, who initiates the action necessary to resolve the market imbalance? Consumer/supplier Higher/lower Fo (response not displayed) Fo (response not displayed) with marginal Opportunity cost/valuation than the original equilibrium price begin to drive prices Higher/lower 5 / 2.5 points STEP 5: On the demand side, what process of change takes place during the market's equilibrating process? Increase/decrease Fo (response not displayed) The quantity demanded as the price is driven Higher/lowered) because consumers with marginal valuations Equal to Higher/Lower Enter/exit (response not displayed) (response not displayed) than the changing price the market. 0 / 2.5 points STEP 6: On the supply side, what process of change takes place during the market's equilibrating process?5 0 / 2.5 points STEP 5: On the demand side, what process of change takes place during the market's equilibrating process? Increase/decrease Fo (response not displayed) The quantity demanded as the price is driven Higher/lower (response not displayed) because consumers with marginal valuations equal to higher lower Fo Enter/exited) (response n than the changing price the market. 6 0 / 2.5 points STEP 6: On the supply side, what process of change takes place during the market's equilibrating process? Increase/decrease Fo (response not displayed) The quantity supplied as the price is driven Higher/lower Fo (response not displayed) because suppliers with marginal (opportunity) costs Higher/equal to lower (response not displayed) Fo Enter exit :displayed) than the changing price the market. 7 / 1 point STEP 7: After the market finds a new equilibrium, the market price will be Higher/lower Fo (response not displayed) and the market quantity will be Higherllower