Estimate the own cost elasticity of demand

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Reference no: EM137535

First-Time Homebuyers Credit

In 2009 as well as 2010 the US government instituted a program where all first-time homebuyers received an $8,000 tax credit upon the purchase of a new house. In April 2010, just prior to the credit's expiration, sales rose 7.6% as well as the median US home cost rose 4% to from $167,000 to $174.000. Assume that all buyers received the $8,000 subsidy.

(a) Show the effects of the subsidy on a graph.

(b) Assuming that all buyers received the credit, estimate the own cost elasticity of demand as well as well as own cost elasticity of supply

Reference no: EM137535

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