Question

Find the flaw in the following argument made by a business analyst in a small town:...

Find the flaw in the following argument made by a business analyst in a small town: "As the number of rental units has increased in the city, the rent prices have decreased . But a lower price will increase demand for the rental units, pushing the price prices up again”. Provide a short but precise answer!

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Answer #1

The higher supply or availability of rental units causes decrease in demand which leads to price reduction however which is gradual and therefore this lower prices remain constant as the availability still remains higher and thus demand doesn't pick in so fast as there is tranition lag in between which causes the price and demand to remain subdued.

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