Change in Supply A Real World Example

Summary

In this engaging discussion, a father and daughter delve into the changes in supply within the mortgage brokerage industry over 28 years. The father, who ran Triangle Financial Services, shares how technological advancements reduced operational costs and shifted the supply curve to the right. However, increased regulations and tighter lending conditions have driven costs up and reduced loan availability, shifting the supply curve to the left. The conversation highlights the dynamic nature of the industry, illustrating how various factors influence the willingness and ability to supply mortgages, ultimately impacting both businesses and consumers.

Takeaways

• 😀 Real-world business challenges affect supply dynamics, as shared by the speaker's father, a long-time mortgage broker.
• 📊 The speaker's father owned Triangle Financial Services for 28 years, highlighting the longevity of experience in the industry.
• 🏢 Triangle Financial Services assisted clients in securing residential and commercial mortgages, acting as intermediaries between lenders and borrowers.
• 💻 Technological advancements, like word processing and the internet, significantly reduced operational costs and improved efficiency in processing loans.
• 📈 The speaker's father observed that lowering costs can shift the supply curve to the right, indicating an increase in supply.
• ⚖️ Increased regulations in the mortgage industry have led to higher costs, impacting the supply curve by shifting it to the left.
• 💵 The attitude of lenders heavily influences the supply of loans, with tighter lending conditions resulting in a decrease in available loans.
• 📉 During economic downturns, fewer firms can afford to stay in the mortgage industry, resulting in a fluctuating number of industry participants.
• 🔄 The mortgage industry experiences cycles of entry and exit for firms, influenced by market conditions and regulatory changes.
• 🌐 For more insights on economic concepts, viewers are encouraged to visit the speaker's educational website.

Q & A

What type of business did the father operate?

The father operated Triangle Financial Services, a mortgage brokerage firm that assisted clients in securing residential and commercial mortgages.

How long did the father own Triangle Financial Services?

He owned Triangle Financial Services for 28 years.

What are the primary responsibilities of a mortgage brokerage firm?

The primary responsibilities include counseling clients on the best mortgage options, packaging their loans, and finding the best rates available.

What technological changes impacted the mortgage brokerage business over the years?

Technological changes included the evolution from large computers to sophisticated word processing software, improvements in communication methods, and the advent of the internet, which allowed for faster loan processing.

How did technological advancements affect the supply curve in the mortgage industry?

Technological advancements reduced the cost of doing business and increased efficiency, which shifted the supply curve to the right, allowing for more mortgages to be offered at lower costs.

What regulatory changes influenced the costs in the mortgage industry?

Increased regulations led to additional costs for compliance, such as paperwork, education, and fees, which shifted the supply curve to the left.

What is the relationship between market conditions and the supply of loans?

Market conditions, particularly interest rates, greatly influence loan volume; when rates are low, volume increases, but strict lender scrutiny during tighter conditions can reduce the supply of loans.

How does the attitude of lenders affect the mortgage supply?

The attitude of lenders is crucial; if lenders are tight with money and scrutinize loans more closely, it results in a decrease in the supply of available loans.

What was the impact of economic booms on the mortgage industry?

During economic booms, new firms were attracted to the industry due to low barriers to entry, increasing competition in the market.

What happens to the number of firms in the mortgage brokerage industry during times of financial tightening?

During times of financial tightening, many firms exit the industry due to stricter lending standards, leading to fluctuations in the number of firms operating in the market.