Question

You will pay the same price for a Snickers bar whether you purchase it in southern California or central Michigan. You will pay a much higher price for a house in southern California than for an identical house in central Michigan. Why the difference between candy bars and houses?

Answer 1

House is an immobile item whereas candy bar is a mobile item. Candy Bar is manufactured at aone centralized location and is then transported to various parts of the country to be sold in different locations. Thus its price is saidto be fixed as it is independent of the changes in labor rates,raw material rates from one place to another. Moreover,Government regulations fix Maximum Retail Price at the which the product is to be sold which remains same from one place to another.

On the other hand,house is constructed at the point of consumption only. The price of land,labors wages, raw material prices vary from one city to another and thus the final price of houses also change from one place to another. The price of houses in different cities depend on the living standards of the population and thus it changes from one point to another.