During 2013, house prices increased in China but declined in Greece. The Chinese Government attempted to slow the increase in house prices by discouraging borrowing. In Greece, the equilibrium price of houses dropped, mainly as a result of lower income. In some countries, governments provide subsidies to housebuilders in order to affect the market for houses.
(a)[2]
State what is meant by ‘equilibrium price’.
(b)[4]
Explain two reasons why borrowing might fall.
(c)[6]
Using a demand and supply diagram, analyse why lower incomes may bring down the market price of houses.
(d)[8]
Discuss whether house building ought to be subsidised.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “the price that makes demand equal supply” …