Economics · Supply and Demand
A government offers tax credits for green home loans, causing their demand to be price-elastic, while mandating banks to hold additional low-yield Green Bonds, raising opportunity costs for standard loans. Simultaneously, a global recession reduces household income. Based on supply and demand principles, what is the likely market impact?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The quantity of Green Home Loans will decrease due to the recession, while Standard Home Loans will increase.
- 2The supply of Standard Home Loans will shift left, and the demand for Green Home Loans will shift right due to tax credits but left due to lower income.✓
- 3The price elasticity of supply for Green Home Loans will become perfectly inelastic.
- 4The demand for all loans will shift right because Green Bonds are now part of bank assets.
Correct answer
The supply of Standard Home Loans will shift left, and the demand for Green Home Loans will shift right due to tax credits but left due to lower income.
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