econ

If i were to do a simple supply and demand curve for subprime mortagages I know I would do the supply as increasing but what happens to the demand would I say the demand for these mortagages also increased causing the price to say the same I feel as though this is wrong and that demand is something else?

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asked by sonia
  1. Think about and review what the demand curve represents. In this case, it is the relationship between the "price" of subprime mortgages and the amount of mortgages people would buy at that price. Using Bobpursley's excellent suggestion, let the price of subprimes be a measure of interest rates above the prime rate. How many subprimes would people want (for get supply for now) if the subprime rate was say 20-points over prime? (hint: very little). How many if the subprime rate was 1/2 point over prime? A lot more. So, the demand curve is downward sloping.

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