83. A number of manufacturing plants in Hometown City recently closed. Based on the principle of supply and demand, what will happen to the market value and the market price for properties in the area?
Answer: D
The market value and the market price will both decline in this situation.
The closure of manufacturing plants in Hometown City will lead to a decrease in demand for properties, resulting in both a decline in market value and market price.
A) The market value will decline, but the market price will remain stable.
This option is incorrect because a decline in market value typically corresponds with a decrease in market price. If the demand for properties falls due to plant closures, it is unlikely that the market price will remain stable.
B) The market value will remain stable, but the market price will decline.
This choice is also incorrect. If the market price is declining, it is indicative of a decreasing market value. Therefore, it is not feasible for market value to remain stable while market price falls.
C) The market value will increase and the market price will remain stable.
This option is incorrect as well. With the loss of jobs and economic activity from the plant closures, both market value and market price are expected to decline, not increase or remain stable.
D) The market value and the market price will both decline in this situation.
This is the correct answer. The closure of manufacturing plants reduces demand for properties in the area, leading to a decrease in both market value and market price due to oversupply and reduced buyer interest.
Conclusion
The principles of supply and demand dictate that when there is a reduction in demand for properties, as seen with the closure of manufacturing plants, both the market value and market price will decrease. All other options fail to accurately represent the economic consequences of a declining demand scenario, making option D the definitive correct response.