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In 2008, the government initiated an $8,000 tax credit for first-time homebuyers in an effort to stimulate the housing market. This means that all first-time homebuyers in 2008 were eligible to take an $8,000 deduction from their taxable income for that year. By offering this tax credit, the government was attempting to influence the housing market.
• How does the tax credit affect market equilibrium for homebuyers and sellers?
• In your opinion, should the first-time homebuyer credit have been increased, extended, or eliminated? Explain your position.
• What likely happened to the supply and demand curves when the tax credit was implemented?
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