Need Insight on this economics question?

Question

If the quantity of housing supplied in a community is greater than the quantity of houses demanded, the existing price:

is above the market equilibrium price.

will rise to clear the market.

will either rise or remain unchanged.

is below the market equilibrium price.

Answer 1

Current price is above market eq price.

Developer builds 1000 houses in a town. By time its complete recession has hit. People are lossing jobs etc.

Demand is well below what developer expected. In order to sell his houses he will have to lower price.

Answer 2

think about it logically..there are tons of houses in a community, and noone wants them. IS there anything causing the price to go up??? Of course not

Therefore the current price is above the market equilibrium...and will likely soon fall.

Answer 3

After reading through the answers (to verify my own) and thinking about it myself, I have to conclude that the question is poorly worded.

At the current time, price is above equilibrium price (exisiting price > market equilibrium price).

However, price will have to fall since demand is low.  So price will go down.  

I'm not sure what its asking.  But that is what I think. I took two economics courses and am currently studying "Principles of Microeconomics" again (to refresh stuff I remember).

Answer 4

Its above the market equilibrium price. Supply and demand tells us that if people want less of something, the price will drop because the demand curve shifts inward.

I think RT and grid are confused about the question. The existing price (aka the price the house is currently selling for would be too high because the new price is lower (from the demand curve shift).

Yes the price needs to be lowered. This means it is already too high.

EDIT: Yeah, poorly worded question. We kinda need to know if it is the price before the market changes or the price after. If it is before, The other two answers are right, otherwise mine is.

Answer 5

Is below the market equilibrium price..

Suppy and Demand curve.

Increasing demand or lowering supply - increases price

Increasing supply or lowering demand - decreases price

Therefore, because there are more houses than are demanded, there is a more supply than needed. An increase in supply, therefore, lowers the market price.

Good luck though and god speed

Answer 6

Is above the market equilibrium price. - is right answer - if there is surplus supplied in marked then prices will tend to drop down.

Answer 7

Is below the market equilibrium price.  When supply exceeds demand, prices drop, which is exactly what is happening right now in the real world.

EDIT: I think the problem here is that this is a badly worded question.  Some (like me) are assuming the market pressures have already acted.  Others are assuming they have yet to act.

Answer 8

If supply is greater than demand then you have to lower the price to entice the buyers.

A. The CURRENT price is above the market equilibrium price

Just think about all of the houses on the market today that aren't selling. People have to lower their price to find buyers.