Assume we have two identical houses. Each house is a 3 bedroom, 3 bath, 2000 square...

 

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Assume we have two identical houses. Each house is a 3 bedroom, 3 bath, 2000 square feet white house on a 1 acre lot and both were built in 1996. The single difference is that house B is located near a beautiful hiking trail and house A is not. a) If both homes are listed for a price of $200,000, explain what will happen to the prices of these houses before the market reaches equilibrium. (1 point) b) Which house is now more expensive? Why? (1 point) c) What does the difference in the value of the houses represent? (1 point) d) Explain the concept of compensating differentials in terms of the property transactions described above. (2 points) bomowardlib.com/quarti Assume we have two identical houses. Each house is a 3 bedroom, 3 bath, 2000 square feet white house on a 1 acre lot and both were built in 1996. The single difference is that house B is located near a beautiful hiking trail and house A is not. a) If both homes are listed for a price of $200,000, explain what will happen to the prices of these houses before the market reaches equilibrium. (1 point) b) Which house is now more expensive? Why? (1 point) c) What does the difference in the value of the houses represent? (1 point) d) Explain the concept of compensating differentials in terms of the property transactions described above. (2 points) bomowardlib.com/quarti

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House Prices and Compensating Differentials a Price movement towards equilibrium Assuming both house... View the full answer