Non-Price Determinates of Demand and Supply - Assignment Example

Apart from Prices; there are other factors that affect Demand and Supply. They are called Non-price determinants. The major nonprice determinants of demand are (1) income, (2) tastes and preferences, (3) the price of related goods, (4) changes in expectations of future relative prices, and (5) population (i.e., market size). The major nonprice determinants of supply are (1) input costs, (2) technology, (3) taxes and subsidies, (4) expectations of future relative prices, and (5) the number of firms in the industry. (Economic Concepts)

City

Minimum

Maximum

Average

New York

$3500

$12,000

$7750

Washington

$5000

$10,000

$7500

Miami

$10,000

$20,000

$15,000

Phoenix

$5000

$10,000

$7750

Pittsburg

$1000

$2000

$1500

Chicago

$12000

$20,000

$16,000

Cleveland

$1500

$5000

$3250

Philadelphia

$5000

$15,000

$10,000

From the table, we see that the prices for the same house vary across different cities.  We can clearly understand that Supply and Demand for houses have affected the prices of the same. The rents of houses in cities like Miami and Chicago seem to be considerably higher than the others. The reason could be because the demand for the houses is more while the Supply is less. Yet, a city such as Pitsburg and Cleveland appears to have lower house rents than others, most probably for, the Supply of houses is more than the Demand.

This would mean that the houses in Miami and Chicago are costlier because of factors such as the income of people or the taste of people for higher standards of houses or the population of the place. These are the non-price determinants of demand. And the houses in other places could be lower for; the supply of houses is more because of the factors such as less cost of house maintenance and more available houses around the city. These are the non-price determinants of Supply.

Therefore, from the above findings, we know that Demand and Supply determine the prices of houses in cities across the USA. We also find that the non-price determinants of demand and supply play an important role in the prices of the house across the USA.