INSTRUCTOR DISCUSSION NOTES:
California Residents Spread Out Over Multiple States

1. Consider the immigration into / emigration from California. Describe the relative changes in population that this would imply for there to be a continual increase in the population statewide.

Foreign-born population immigrating to California must continually be larger than the amount of people leaving the state. But to maintain the relative changes in housing that are occurring, as more foreign-born people come into the state, more and more people leave. But the relative ratio is always greater than 1.

2. Draw a graph of supply and demand for housing in Los Angeles and in Salt Lake City to describe what is happening in the article.

Demand is rising faster than supply in both areas, but must be rising faster in California to keep the relative prices above that in Salt Lake City.

3. As people get priced out of the housing market in Salt Lake City, what do you think would happen? Use your economic analysis to explain what kind of housing these people would look for, as well as the impact on price of that housing.

People priced out of the market would have to rent - which would push up rental prices - or move elsewhere to find affordable housing. But that pushes up housing prices as well. The net impact on housing as a result of people moving from California is to make it more expensive everywhere else.

Multiple Choice/True False Questions

1. The housing prices in places like Salt Lake City are increasing because
  1. Demand is rising faster than supply is rising.
  2. Demand is falling faster than supply is rising.
  3. Demand is rising faster than supply is falling.
  4. Demand is falling faster than supply is falling.
ANS . a

2. The inability of former Californians to return to their home state can be referred to as a(n)

  1. Fixed cost
  2. Sunk cost
  3. Variable cost
  4. Opportunity cost
ANS .d

3. As more and more Californians leave the state for others, what impact will that eventually have on wages in those destinations?
  1. Wages should rise because of the increase in supply of workers.
  2. Wages should fall because of the increase in supply of workers.
  3. Wages should rise because of the decrease in supply of workers.
  4. Wages should fall because of the decrease in supply of workers.
ANS . b

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