The current housing market is a "seller's market" as sale prices are often higher than what is asked/listed. In many cases, buyers are even buying without having the home inspected as sellers are unlikely to make repairs anyway; they just sell to a buyer who won't ask.

Consider the market for home warranties. As it relates to the above...

1) What is the initial effect? (4 pts.)

2) How does the market adjust? (4 pts.)

3) How is equiliibrium affected? (2 pts.)