Watch the ABC Q&A episode of Monday 16 March, 2015 \"Intergenerational Wealth an
ID: 1211162 • Letter: W
Question
Watch the ABC Q&A episode of Monday 16 March, 2015 "Intergenerational Wealth and Health" (link below). Use the navigation panel on the right hand side to jump to the discussion on Super House Buying. Keep watching until minute 34:53 (Negative Gearing question). When discussing the effect of letting people use superannuation to buy houses, Chris Bowen uses an example of someone now having an extra $30,000 available and going to an auction. What level of supply elasticity is implicit in Chris Bowen's analysis of the effect of the policy? (ends at minute 35:31)
http://www.abc.net.au/tv/qanda/txt/s4181085.htm
A. Perfectly inelastic B. Unitary elastic C. Perfectly elasticExplanation / Answer
Chris Bowen is talking about a market where the demand is perfectly elastic which means that the supply of the houses respond even to a slightest change in price. Since in the auction the highest bidder got the house so the supply responded to change in price effectively.
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