Many market conditions impact housing prices. Which of the following is a true statement?

• A. A decrease in demand for housing, with supply held constant, will generally lead to higher equilibrium prices.
• B. An increase in demand for housing, with supply held constant, will generally lead to higher equilibrium prices.
• C. Market equilibrium is unaffected by changes in either supply or demand.
• D. An increase in the supply of housing, with demand held constant, will generally lead to higher equilibrium prices.

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the basic concepts of supply and demand in a market. Demand refers to how much consumers want to buy at different prices, while supply refers to how much producers are willing to sell at different prices.
2. Step 2: Recall the law of demand: when demand increases (with supply constant), the equilibrium price tends to rise because more buyers compete for the same quantity of goods.
3. Step 3: Recall the law of supply: when supply increases (with demand constant), the equilibrium price tends to fall because more goods are available, reducing the price needed to sell them.
4. Step 4: Analyze each statement by applying these laws: a decrease in demand with constant supply generally lowers prices, not raises them; an increase in demand with constant supply raises prices; changes in supply or demand do affect equilibrium; an increase in supply with constant demand lowers prices, not raises them.
5. Step 5: Conclude that the true statement is the one that says an increase in demand, with supply held constant, will generally lead to higher equilibrium prices.