Illustrate graphically the effect the credit market crisis in the Unit

Illustrate graphically the effect the credit market crisis in the United States in 2008 had in the market for existing single-family homes.

Assuming the demand for existing single-family homes is relatively inelastic, what is likely to happen to the total revenues of home sellers as a result of the credit market crisis?

ANSWER

The credit market crisis resulted in a large increase in the number of home foreclosures, which in turn dramatically increased the supply of existing single-family homes that were for sale, i.e, the supply curve for existing homes shifted right, causing equilibrium price to fall. Assuming the demand for existing single-family homes is price inelastic, the price effect would dominate the quantity effect on total revenue and the total revenues of sellers of single-family homes would decrease.