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Introduction of theoryDemand supply and elasticity are basic economic concepts that when applied to different markets can help governments and individuals make informed decisions about things as basic as where to live and how to collect taxesConnection to articleRecently Credit Suisse conducted a survey and determined that Switzerlands most expensive canton is Geneva while the cheapest place to live is Appenzell Inner Rhodes AIRAnalysisDemand is a curve showing the various amounts of a product consumers want and can purchase at different prices during a specific period of time Supply is a curve showing the different amounts of a product suppliers are willing to provide at different prices Equilibrium price and quantity are determined by the intersection of demand and supply Price elasticity of demand PED indicates the responsiveness of consumers to a change in price and is reflected in the relative slope of demandIn the graph below the markets for housing in Geneva and AIR are shownDemand for housing in Geneva Dg is high because of the many employment opportunities there In addition Genevas scarce land means supply of housing is low resulting in a high equilibrium rent Rg Demand for housing in Geneva is inelastic since renters in Geneva are less responsive to changes in rent compared to AIR perhaps due to the perceived necessity of living close to their workDemand for housing in AIR Da is low but supply is high due to the abundance of land AIR is a rural canton with few jobs therefore fewer people are willing and able to live there than in Geneva Since living in the countryside is not a necessity demand is relatively elastic or responsive to changes in rent The lower demand and greater supply make the AIRs equilibrium rent relatively lowThe effect of a tax on property is a shift of the supply curve to the left and in increase in rents as landowners forced to pay the canton a share of their rental
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