Demand Shift for Houses

Steps:

• Identify that rising price and quantity signal a rightward demand shift with stable supply.
• Note demand for houses rises with higher incomes (more buying power) and lower interest rates (affordable mortgages).
• Check supply: unchanged if construction wages stable; leftward if wages rise (higher costs).
• Select option boosting demand without harming supply.

Why D is correct:

• Higher incomes and lower interest rates shift demand right per the law of demand, raising equilibrium price and quantity with unchanged supply.

Why the others are wrong:

• A: Falling incomes shift demand left (lowers quantity); rising wages shift supply left (raises price), but quantity falls overall.
• B: Falling incomes and rising rates both shift demand left, lowering price and quantity.
• C: Rising rates shift demand left; falling wages shift supply right, lowering price (quantity may rise, but price falls).

Final answer: D