Posted by sonia on Wednesday, August 5, 2009 at 4:14am.
I am having difficulty. You ask about supply and demand for subprime mortgages, then shift to supply of houses. Surely you are not equating supply of subprime mortgages with supply or demand for houses.
I am confused I felt that is the only way I could relate a graph to subprime mortagages. How would I describe a supply and demand curve for this?
My point above was that the greater number of subprime loans were not for new construction, but for refinanced homes.
Now, your delimina. P should be the net cost (in percent over prime) of the loan over time, not the initial rate. Using that, you have a normal D and S curve. D decreases with Q, and S increases.
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