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Essay on Introduction to Economics
If we combine Demand and Supply, we are given a good model of the price mechanism. The price mechanism is the fundamental determinant that governs the price at which commodities will be sold in a perfect market, but because no market is free from some form of intervention, it is not totally accurate. In a balanced market, the number of homes on the market is equal to the demand, or number of buyers. The prices are generally stable, houses sell within a reasonable period and sellers accept reasonable offers.
Among the more important influences that must be considered in an analysis of the demand and supply of homes, are the following:
Interest rates - There is generally a direct connection between interest rates and prices. The higher the rates the lower the prices, and vice versa. The lower the rates, the more people who can afford to buy their first home or an investment property. This puts greater demand on the market.
Taxes - An area with high municipal property taxes can be a disincentive to a purchaser. This could cause the real estate prices to drop. Provincial taxes, such as a property purchase tax, will restrict some buyers...
