Alright, AP students… you are economics detectives and you’ve been assigned your first case. The mystery is thus: how can decreasing demand cause prices to go up? In chapter three, we are reading about product markets, the interaction of supply and demand, and market equilibrium price and quantity. You’ve read that prices are affected by the interaction of supply and demand. Clearly, if demand for a product rises, prices should go up unless supply increases a certain amount. On the other hand, if demand falls, then prices should fall unless supply falls at the same time.
So what’s happening in the article above? The headlines seems to proclaim an economic impossibility is occurring: as demand falls, prices rise! How is this possible? Is it? Is the market for apartments in the D.C. area defying the laws of demand and supply? Read the article and see if you can solve this economic mystery!
So what’s happening in the article above? The headlines seems to proclaim an economic impossibility is occurring: as demand falls, prices rise! How is this possible? Is it? Is the market for apartments in the D.C. area defying the laws of demand and supply? Read the article and see if you can solve this economic mystery!
