(Feb 2018 Exam) Data from the Housing and Development Board (HDB) shows that the average price of a 5-room resale flat in Ang Mo Kio in the third quarter of 2017 was $789,000 with 61 units transacted*. With the economy continuing to do well and more foreigners applying to become permanent residents and hence becoming eligible to buy HDB resale flats, prices of 5-room resale flats in Ang Mo Kio are expected to rise in the fourth quarter of 2017. The sellers of 5-room resale flats are the existing owners of the flats. * Data from HDB website
(i)Draw and label the demand and supply curves of 5-room resale flats in Ang Mo Kio for the third quarter of 2017. Label clearly the axes, the curves, the equilibrium price and the equilibrium quantity.
(ii) Based on the information provided above, explain how the demand curve of the 5-room resale flats in Ang Mo Kio will behave and how the equilibrium price and quantity will be affected in the fourth quarter of 2017.
Superimpose the new demand curve onto the graph you have drawn in (i). Label clearly the axes, the curves, the new equilibrium price and the new equilibrium quantity. Explain the impact.
(iii)if the government introduces a new measure that allows only Singapore citizens to buy HDB resale flats, explain and illustrate on the same diagram the impact of such a restriction on the equilibrium price and equilibrium quantity of 5-room resale flats in Ang Mo Kio.
