a As the economy is improving many people are buying houses

a. As the economy is improving, many people are buying houses , which is leading to increase on price of houses b. As the price of houses is increasing people are buying feeder homes. Do you see any contradiction between the two statements? Using demand and supply theory of price determination, please answer the question.

Solution

Yes, I can indeed see a big contradiction in the given two statements and this is because of the fact that statement (a) states that as the GDP increases the average income of GDP per capita also increases with which people get to buy more houses with which the demand for the houses increase and with the increase in the demand of the houses, the price also increases all in all. Statement (b) states that if theres an increase in the price then the demand for the houses gets reduced and people buy less houses than before and this is in constrast with the previous statement where people will buy more homes all in all.