Why is capitalization rate important in the housing market


Discussion:

1. Local entrepreneurs argue that a city (Tallahassee)'s future growth depends on its ability to establish and grow technology industries. Using the concepts underlying shift-share analysis, evaluate the potential effectiveness of this urban growth strategy.

2. A city (Tallahassee) has experienced a resurgence of agricultural production on edge of the city. Many believe this growth is due to rising demand from city dwellers. What does this suggest about the city's urban form using the Bid Rent Function.

3. Why is the capitalization rate important in the housing market? How would lower expected rents in the housing market influence the capitalization rate and what would you expect to happen to investment in the housing market?

4. Elected officials in the state legislature are supporting legislation that subsidizes the entertainment industry, specifically film and sports stadiums, because they promote economic growth for cities. Evaluate this claim if the employment multipliers for the sports entertainment, higher education, and aerospace industries are 1.5, 2.3, and 5.0 respectively.

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Microeconomics: Why is capitalization rate important in the housing market
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