Suppose people who are thinking about buying a home (demanders in the housing market) and current home owners who are thinking about selling their homes (suppliers in the housing market) suddenly believe that home prices are likely to be significantly higher next year than this year.
a. Will this change in expectations cause the demand curve for housing this year to shift to the left or shift to the right? Explain.
b. Will this change in expectations cause the supply curve for housing this year to shift to the left or shift to the right? Explain.
c. Will these shifts in the demand and supply curves lead to an increase or a decrease in the price of housing this year? Use supply and demand curves to explain your answer.