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Broker - Economics > Supply and Demand > Flashcards

Supply and Demand Flashcards

1
Q

The function of any marketplace is to provide a setting in which supply and demands can operate to establish what?

A

Price

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2
Q

When supply increases and demand remains stable, which of the following usually takes place? A.) Prices fro down, B.) Prices go up, C.) Market equiliibrium achieved. D.) inflation occurs

A

Prices go down

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3
Q

Which of the following is TRUE of RE markets? 1.)They are immune from supply and demand, 2.) They are primarily local in nature, 3.) They are national markets, 4.) They are characterized by uniqueness and mobility

A

2.) they are primarily local in nature.

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4
Q

All of the following are factors that tend to affect the supply side of the market EXCEPT 1.)Labor force 2.) material costs 3.)government financial policies 4.) demographics

A

4.) Demographics

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5
Q

On a graph illustrating the supply curve, what characteristics is measured on the y axis?

A

price is on y axis (vertical), quantity is on x axis(horizontal)

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6
Q

The amount of goods and services that people are willing and able to buy at a given price is called:

A

demand

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7
Q

What is the single most important factor in determining demand in the real estate market?

A

affordability

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8
Q

The number of people coming into an area, minus the number of people who leave, is the way of determining what?

A

Net Migration

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9
Q

The characteristic direction of the demand curve is

A

Down and to the right

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10
Q

The characteristic direction of the supply curve is

A

up and to the right

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11
Q

the interrelationship between demand and price is referred to as what?

A

elasticity

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12
Q

Prices for goods and services are set by the operation of:

A

supply and demand

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13
Q

when demand increases and supply remains stable, what happens?

A

prices go up

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14
Q

Two characteristics of real estate govern the way the market reacts to the pressure of supply and demand forces. What are they and WHY?

A

Uniqueness and Immobility – natural disasters, sudden changes in financial markets, or local events like a plant closing can dramatically disrupt a seemingly stable market

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15
Q

What are the three factors that must be taken into consideration in determining value?

A

money, interest rates, and inflation

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16
Q

What factors affect supply?

A

labor force, construction/material costs, government control and financial policies

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17
Q

What do supply schedules or the supply curve do?

A

measure supply

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18
Q

what refers to the responsiveness of supply or demand to price?

A

elasticity

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19
Q

what are the factors affecting demand and which of those factors are most important

A

population, demographics, and employment/wage levels, but affordability is the most important

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20
Q

What types of items have high elasticity and why?

A

Luxury items like electronics because demand can increase significantly with decrease in price

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21
Q

What types of items have low elasticity and why?

A

necessity items like toilet paper. Basic products is relatively inelastic

22
Q

What are some of the community amenities that have a tendency to enhance value?

A

Educational opportunities, public transportation, streets/highways/freeways, utilities (abilities to meet expanding environment), sports, cultural, and recreational facilities

23
Q

True or false - economic diversity is not imperative for a healthy economy

A

False - you don’t want all your eggs in one basket. Towns with only one major employer (mill, military base, factory) are extremely vulnerable.

24
Q

The two principal forces that drive an open market are:

A

supply and demand

25
Q

What is defined as the quantity of a product or service available at a specified price?

A

Supply

26
Q

Supply is determined by what two factors

A

how much it costs to produce and the cost of other goods

27
Q

Equilibrium occurs when what happens?

A

Just like when there are as many home buyers as there are seller, equilibrium occurs when supply and demand of a particular variable are in balance and there is no pressure on the variable to change

28
Q

Credit availability is always a primary concern on the demand or supply side of the real estate marketplace

A

demand

29
Q

True or false - When interest rates are low, lenders shift risk to the borrower basing loan products on a variable rate structure.

A

False - low interest rates usually command fixed rate mortgages

30
Q

What index drops when interest rates rise?

A

the National Association of Realtors’ Affordability index, which measures the percentage of potential buyers who can afford a median priced home

31
Q

What is the primary concern on the demand side of the Real Estate marketplace?

A

credit availability

32
Q

When inflation is high, what rates also rise and why?

A

interest rates. In an effort to curb runaway spending, you begin to see restrictions on the overall affordability of capital across the board

33
Q

When interest rates are high, what types of loans are usually available? Fixed rate or variable rate loans and why?

A

Variable rate loans because lenders want to shift the risk to the consumer.

34
Q

what does FTB-HAI stand for?

A

first time buyer housing affordability index

35
Q

what does FTB-HAI measure?

A

the percentage of households that can afford a median priced home in prevailing market conditions

36
Q

What does PITI stand for?

A

Principal, Interest, Taxes, and Insurance

37
Q

What is PITI used for?

A

Because PITI represents the total monthly payments, it helps both the buyer and the lender determine the affordability of an individual mortgage

38
Q

In Real Estate, what are the 4 common factors influencing supply?

A

Availability of 1.) Skilled Labor, 2.) construction financing 3.) land, 4.) raw materials

39
Q

The Federal Reserve established a ____________ rate of interest for the money it lends to commercial banks.

A

discount

40
Q

Give two examples beyond interest rates of how a government’s policies can directly impact the real estate market

A

Removing the 1031 exchange, decreasing the the supply of land through conservation acts, regulations that could increase or decrease the value of land, taxation, REZONING, Land use controls,

41
Q

What is the difference between monetary policy and fiscal policy?

A

Fiscal has to do with taxation and government spending to regulate or stimulate economic activity. Monetary Policy has to do with policies that regulate the supply of money, the structure of interest rates, and availability of credit.

42
Q

on a supply curve graph, the x axis is vertical or horizontal? And what does it measure?

A

horizontal - quantity. The y axis (vertical) measures price.

43
Q

The demand curve is a function that shows what?

A

the quantity demanded at different prices. That is the quantity that Buyers are willing and able to purchase at a given price.

44
Q

True or False? Demand Curves are about the Seller’s purchase power

A

False. Demand Curves measure Buyers’ willingness to purchase goods at different prices

45
Q

the supply curve is a function that shows what?

A

how much of a good Sellers are willing to supply at different prices

46
Q

A higher price on a supply curve typically means what in relation to the quantity supplied? More or Less of a good is supplied at higher prices?

A

More! Think Oil. There are a few countries where retrieving oil is cheap, but its expensive to drill for oil in most places. So there are some companies that can turn a profit by selling cheap gas, but there are MORE companies that need prices to be higher in order to turn a profit. So the supply curve rises as more companies are willing to sell at higher prices.

47
Q

Lets say the price of oil is $50 a barrel and that’s above the equilibrium price (i.e. more than what most people want to pay) – so the quantity supplied is more than the quantity demanded – and that leads to a __________ which causes Sellers to lower their prices.

A

A Surplus. When sellers can’t sell as much as they like to at a certain price, they often end up discounting goods to generate interest until an equilibrium is reached

48
Q

Lets say the price of oil is $15 a barrel and that’s below the equilibrium price (i.e. high demand for oil at such a low price, selling at high quantities), but this leads to a ____________ which causes Sellers to raise their prices

A

Shortage.

49
Q

In real estate, what are three factors affecting demand?

A

demographics, population (migration - net and natural), employment and wage levels.

50
Q

the interrelationship between demand and price is referred to as

A

elasticity

Broker - Economics (3 decks)

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