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.
As manufacturing plants close in Hometown City, the overall demand for properties is likely to decrease, which will lead to 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 if the market value declines due to reduced demand, it is unlikely that the market price would remain stable. Typically, a drop in demand affects both the perceived value and the actual transaction prices.
B) The market value will remain stable, but the market price will decline.
This option is also incorrect. A decline in local economic activity from plant closures would likely affect both market value and market price negatively. Stability in market value contradicts the expected impact of decreased demand.
C) The market value will increase and the market price will remain stable.
This option is incorrect. The closure of manufacturing plants typically leads to a decrease in economic activity and demand for properties, making it highly unlikely for market value to increase while prices remain stable.
D) The market value and the market price will both decline in this situation.
This option is correct. With the closure of multiple manufacturing plants, demand for properties in the area is expected to decrease, leading to a decline in both market value and market price as buyers have less incentive to purchase properties.
Conclusion
The correct answer is D, as it accurately reflects the economic principle that a decline in demand, such as that caused by plant closures, will lead to a decrease in both market value and market price. All other options fail to recognize the direct correlation between demand and property prices in this context.