Question: Due to a slight recession that lowered incomes, the 2002 market prices for last minute rentals of US beachfront properties were lower than usual.

a. How does a recession affect the demand curve and the supply curve for rental properties? In answering the supply curve question, consider the two options faced by owners of beach homes: staying in their vacation home themselves or renting them to others.

b. Use a supply-and-demand analysis to show the effect of decreased income on the price of rental homes.