Supply And Demand Essay

Dec. 10th 2009
Supply and Demand Ratio for Albuquerque Real Estate Market
The supply and Demand concept is essential in economics, especially for free trade markets.
The relationship between supply and demand determines value or a market price of a product
also called equilibrium. The Equilibrium price requires quantity of demand to be equal to
quantity of supply for the same product.
Ceteris Paribus or everything else being equal, if quantity of demand exceeds quantity of supply
we have a shortage of the particular good and price would increase. In inverse case, when the
Some of the determinants that directly affect demand are: taste, income, prices of substitutes
or related goods, expectation, and population. One single and most important supply
determinant is the cost of production, although other factors such as regulation, taxes and
subsidies, technology changes, etc., could have a significant impact on supply and production.
Like in any other industry, the supply and demand quantities play an extremely important role
number of listed homes in comparison to the number of sold homes depicts how healthy and
productive particular market is. It would also show not only the increase of inventory of
available properties but also the decrease in price should the surplus occur.
The Albuquerque metro area has been experiencing an extremely high supply of homes on the
market lately. The month of November 2005 had 2263 (2108 detached and 155 attached) active
listings. In the same month 1130 (1021 detached and 109 attached) transaction closed. The
medianprice was $178,900 and the long term, fixed mortgage interest rate was at 5.85%. In
comparison, the month of November 2009 had 5413 (4834 detached and 579 attached) active
listings and only 646 closed transactions (586 detached and 60 attached) .The median
price was $175,750 and the mortgage rate was at 5.75%.
The absorption rate which measures (in...