new to econs, not sure if i’m overthinking or got the concept wrong. i’m very confused with the whole quantity demanded and demand thing.
say the government provides subsidies to consumers so that they pay less to get housing. does this change the quantity demanded? because technically the price of the house itself did not actually change, but the price that consumers are paying changed. so does it affect quantity demanded?
also i’m wondering if supply stays the same but demand increases, it can lead to a shortage right? or is it only specifically quantity demanded exceeding quantity supplied?
does subsidies affect quantity demanded?
byu/tenshineptune inAskEconomics
Posted by tenshineptune
1 Comment
>say the government provides subsidies to consumers so that they pay less to get housing. does this change the quantity demanded?
This would shift the demand curve to the right, which would have a higher (overall) price point and consumption. The effect of the subsidy is distributed relative to elasticity- the more elastic side will capture more of the gain.
>because technically the price of the house itself did not actually change, but the price that consumers are paying changed.
This would increase the total cost of housing, while having some decrease in the cost paid by the consumer.
>also i’m wondering if supply stays the same but demand increases, it can lead to a shortage right? or is it only specifically quantity demanded exceeding quantity supplied?
No, because this doesn’t break supply and demand like a price control. Also, housing demand isn’t consume/not consume housing, it’s about features of housing- instead of saying you’ll now consumer housing at a certain price point, a demand curve for an individual would be how much someone’s willing to pay for additional features, such as newer construction, better location, size, yard, etc.