A feature of the UK housing market is the low quantity of new houses built compared to the long term growth in demand. Despite high house prices, firms are unable / unwilling to build as many as market forces dictate. The supply of housing is price inelastic. The lack of supply has meant that the …
Readers Question: Why is US in Recession? According to the latest statistics provided by the Economist April 24th 2008 US economic growth is 2.4% year on year. In the last quarter, growth is 0.6%. This is still a long way off the technical definition of a recession – negative economic growth for two consecutive quarters. …
Readers Question: When would you want to own a business that sells price-elastic products? Why? Price elastic products mean that if there is an increase in price, there will be a bigger % fall in demand. Therefore, with elastic goods, there is little incentive to increase the price because there will be a bigger % …
Readers Question: When my class and I try to test the Marshall-Lerner condition it doesn’t always work. i.e. we assumed a country with just one export and one import and assumed their price elasticities added up to less than one. We gave each a price and quantity that led to a current account balance =0 …