Question

In: Economics

Consider a collection of abandoned buildings near the waterfront of an established Midwestern city in the...

Consider a collection of abandoned buildings near the waterfront of an established Midwestern city in the United States. Under what economic and market conditions might this collection of buildings be an investment opportunity?

Declining Population locally, but positive national economic outlook (stock prices and mild inflation).

Increasing Population and Positive Economic Indicators (growing employment, etc.), and the potential to repurpose the buildings into a new use.

Low or negative price inflation in the local real estate market, but income growth in the national economy.

All of the above.

None of the above.

Some observers claim that high-speed internet connections will constitute a “Death of Distance” and drive a change in real estate markets between urban areas and more isolated locations. Which of the following best explains how this idea is (and will continue to) impact real estate markets?

This will lead to increased supply (and reduced price) in cities, and decreased supply (and increased prices) for areas further from cities.

This will lead to reduced supply (and increased price) in cities, and increased supply (and reduced prices) for areas further from cities.

This will lead to increased demand (and price) in cities, and reduced demand (and prices) for areas further from cities.

This will lead to reduced demand (and price) in cities, and increased demand (and prices) for areas further from cities.

None of the above.

Solutions

Expert Solution

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1. The answer is "Increasing Population and Positive Economic Indicators (growing employment, etc.), and the potential to repurpose the buildings into a new use."

(This is because increasing population will result in increasing demand for housing. If the abandoned buildings are renovated and there is enough economic growth locally then this area will experience an increasing demand and consequently create better local and societal services.)

2. The answer is "This will lead to reduced demand (and price) in cities, and increased demand (and prices) for areas further from cities."

(The "Death of Distance" basically means that individuals can work form any corner of the world if the telecommunication network is strong enough. Hence demand for isolated locations will increase as they are relatively cheaper and this might result in lower demand in urban areas eventually.)


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