Homework 1.docx - Cody Krueger Dr Shree Managerial...

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Cody Krueger Dr. Shree Managerial Economics Homework #1 2.3- The inefficiency that is created lies within the housing market. Subsidiaries for flood insurance lowers the wealth factor of buying a home because it increases what is needed to be spent to live in the home. If your home lies in the flood district, it is required for you to buy flood insurance. If an entire housing market that was once not in a flood district, then gets rezoned into a flood district, then the entire market can lose tremendous value. When buyers are moving in, they don’t want to hear that they are going to need to spend an extra 7 or 8 thousand dollars a year on flood insurance. This can make it difficult for the homes in this market to sell, therefor decreasing the overall value of the market. This entire process leads to the extinguishing of wealth in the area because high value homes are able to be obtained by low value customers.
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