1. In the early 2000s, the demand for housing increased substantially as low interest rates increased the number of people who could afford homes.
- What was the likely effect of this on housing prices? Demonstrate graphically.
- In 2005, mortgage rates began increasing. What was the likely effect of this increase on housing prices? Demonstrate graphically.
In a period of increasing demand for housing, would you expect housing prices to rise more in Miami suburbs, which had room for expansion and fairly loose laws about subdivisions, or in a city such as San Francisco, which had limited land and tight subdivision restrictions?
2. Some economists believe minimum wages create distortions in the labor market. If you are an employer and unable to hire the one willing and able to work for the lowest wage, how else might you choose a worker? Is this fair?
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