In 2013, house prices climbed in China but declined in Greece. The Chinese Government tried to slow the increase in house prices by discouraging borrowing. In Greece, the equilibrium price of houses dropped, mainly because income fell. In some countries, governments provide subsidies to housebuilders in order to shape the market for houses.
(a)[2]
Define what is meant by ‘equilibrium price’.
(b)[4]
Explain two reasons why borrowing could fall.
(c)[6]
Using a demand and supply diagram, analyse how a fall in incomes may lower the market price of houses.
(d)[8]
Discuss whether house-building ought to receive subsidies.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “the price where demand and supply are equal” …