This model will represent how the changes in price elasticity compared to the median price, affect the supply and demand within the real-estate domain.
1) Price and Demand Elasticity can be changed between 0-100 to show variances within the sensitivity of price in the market.
2) Buyers & Sellers are set to 75 however this can be fluctuated between 0-150 to represent variances within the demand & supply in the market.
3) Median Price is set to 75 since the total amount of buyers and sellers within the market is set to a maximum of 150. 75 is therefore the ‘median’.
4) Interest rates are also a factor in the demand of houses and influence the motivation for Buyers. If interest rates are high, Buyers are less motivated to buy due to increase in mortgages, therefore having a decrease in the demand and vice versa for when they are low. The following equation compares the price of houses to the median price, and if this condition is true, will apply Interest Rate(s) to the following logic.
if [Price]<[Median Price] Then
([Interest Rate]+[Demand Growth Ratio]-[Demand Growth Ratio])*[Buyers] end if
5) The price of houses is directly influenced by elasticity of demand and price within the market place. For example; if the elasticity of demand is relatively inelastic, the percentage change in the amount of houses demanded is smaller than that of the price. The following equation applies the logic listed above.
60-[Supply Elasticity of Price]/100*[Total Sellers]+[Demand Elasticity of Price]/100*[Total Buyers]+[Price Elasticity of Supply]/100*[Total Sellers]