Los Angeles sky-rocketing Essay

Published: 2020-04-22 15:06:56
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Category: Los Angeles

Type of paper: Essay

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A1. The existence of poverty is not directly related to the amount of natural resources a country owns or not. Poverty, in todays world greatly depends on the ability to exploit those natural resources. Countries in South America are blessed with significant amounts of natural resources. Yet, when one travels to these places, it is amazing to see the amount of poverty that still prevails there. The question of the existence of poverty when there are enough natural resources to eradicate them is a natural instinct from the human mind.

But it should be remembered that economic welfare and growth and development all depend to a great extent on the human capital available to tap in those resources. It is not possible for a country to remove poverty on the basis of natural resources if there are not enough skilled workers or entrepreneurs willing to take the risk of exploiting these resources. Equally important is government support and willingness to explore these natural resources.

It should also be remembered that despite the availability of natural resources some countries cannot get rid of the poverty crisis due to there being not enough initiatives form the government and people within these countries owing to the prevailing economic conditions of these countries. A2. The lowering of interest rates by the U. S. Fed resulted in a lot of dollars floating around in peoples pockets. These had to be invested somewhere: this led to the demand for homes in Los Angeles sky-rocketing.

However, this surge in demand saw a surge in home prices by an average of 250%. (How Low will Los Angeles Home Prices Go? ) Buyers cannot keep up pace with the high increases in house prices for so long. The supply of homes in Los Angeles is not at its saturation point. With new constructions in full swing and a lot of mega projects underway, there is avid supply of Los Angeles houses in the next five years or so. The demand for houses grew since the federal interest rates were cut. This led to a double phenomenon of growing demand as well as growing supply.

In terms of economics, this leads to high equilibrium prices but the equilibrium quantity depends on the magnitude of the increases in demand and supply. In the case of Los Angeles houses, the demand has grown more than the supply. Therefore, many well-price houses are still selling. However, in the long-run this is a bubble-burst situation. There is a high possibility of the home prices in Los Angeles bursting out of reach of the average buyer. This bubble could continue to grow till there is a shift in Federal interest rates.

This could happen by the end of 2008 or at the beginning of 2009. Till then, I would expect house prices to continue growing at a fast pace while supply would be consolidated. Therefore, then I would expect the price bubble to burst by the beginning of 2009, or due to a major change in monetary policy by the Fed.

Bibliography

How Low will Los Angeles Home Prices Go? City-Data. com. 4 July 2008 .

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