Are the following two observations inconsistent?
a. Rising demand for housing causes prices of new homes to soar.
b. Many families refuse to buy homes as prices become prohibitive for them.
The observations are
A.
consistent because both of them apply to movements along the demand curve.
B.
inconsistent because due to rising demand prices will become too high and no one will be buying homes.
C.
consistent because rising demand will shift the demand curve and higher prices will cause movement along the demand curve.
D.
inconsistent because in the first one the demand increases and in the second one the demand decreases due to higher prices.
D.
inconsistent because in the first observation the demand increases and in the second observation the demand decreases due to higher prices.
D. inconsistent because in the first observation, rising demand causes prices to soar, while in the second observation, many families refuse to buy homes as prices become prohibitive. These two observations suggest different effects of rising prices on demand, making them inconsistent.
The correct answer is D.
Observation a states that rising demand for housing causes prices of new homes to soar, implying that there is an increase in demand for homes. On the other hand, observation b suggests that many families refuse to buy homes as prices become prohibitive for them, indicating a decrease in demand.
These two observations are inconsistent because in the first observation, the demand for housing is increasing, while in the second observation, the demand is decreasing due to higher prices. Therefore, the correct answer is D.
To arrive at this conclusion, we first need to understand the concept of the demand curve and how changes in demand and price are represented. The demand curve illustrates the relationship between the price of a good and the quantity demanded. When demand increases, the demand curve shifts to the right, indicating that consumers are willing to buy more at each price level. Conversely, when demand decreases, the demand curve shifts to the left, indicating that consumers are willing to buy less at each price level.
Therefore, when we analyze the two observations in question, we can see that they describe conflicting scenarios: one statement suggests an increase in demand, while the other implies a decrease in demand.