A Town's Population Grows
Thousands of new residents move into a region, increasing the number of buyers and shifting housing demand right.
A Town's Population Grows
Supply and DemandThousands of new residents move into a region, increasing the number of buyers and shifting housing demand right.
Equilibrium at Quantity 57, Price ($) 44
Start in equilibrium
The regional housing market begins in equilibrium where supply and demand cross. At that price every unit up for rent finds a household, and every household looking for a unit finds one.
Now try it yourself: shift the curves in a graded FRQ drill, or open this graph in the free sandbox.
Students predict what happens before the graph moves. No accounts, nothing graded.
A Town's Population Grows, step by step
- 1
Start in equilibrium
The regional housing market begins in equilibrium where supply and demand cross. At that price every unit up for rent finds a household, and every household looking for a unit finds one.
- 2
New residents arrive
A large employer opens nearby and thousands of people move into the region. The number of buyers is a determinant of demand, so at every price more housing is wanted than before. Demand shifts right.
- 3
A shortage appears
At the original price, the quantity of housing demanded now exceeds the quantity available. Families bid against each other for the same units, and that shortage pushes the price up.
- 4
New equilibrium
As the price rises, landlords and builders bring more units onto the market by moving up along the unchanged supply curve, while some households decide to look elsewhere. The market settles at a higher price and a larger quantity.
- 5
Supply never shifted
No new construction technology arrived and no input got cheaper, so the supply curve stayed exactly where it was. The extra housing that gets rented out is a movement ALONG supply caused by the higher price, not an increase in supply.
Where it ends up
A rise in the number of buyers shifts demand right, so the equilibrium price of housing rises and the equilibrium quantity rises.
Now draw it yourself
Same graph, graded on whether you move the right curve and leave the rest alone.
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