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Upper Valley Ridge Mania: That was what the economists called it. Goose waddled up and down the short path of his lawn, further trampling down the new clay that he had only added the day before. "What is the matter, dear?" Mrs. Goose asked. "Something is not right about Upper Valley Ridge." "Why? Prices are soaring, and everyone is happy because they are making money." "That is just it, why are the prices soaring? I sell a 6.3 square feet nest for 16 thousand seeds, and a month later the same nest gets resold at 17 thousand seeds and more so the following month. I don't understand." "What is there not to understand? The homes you built are of excellent quality." "Yes, I know that. But were they meant to cost more than 16 thousand seeds?" "Isn't the higher price better?" "Not if it means I can buy the same thing elsewhere for a much lower price." "I don't understand what you are saying, dear." "You see, the seed value of the homes have increased but the utility or the use of each home has not changed. So how can there be an increase in the real value?" "Dear, you think too much. You should enjoy your success, not wonder why it is successful." "You are right," Goose conceded. "I should go, or I'll be late for the meeting." All along his way to Scale's office he heard monkeys chattering in the branches and birds chirping on swinging twigs about the rising prices of Upper Valley Ridge. Again the average price had gone up by another 2% since the previous week. A thought suddenly occurred to Goose; What would happen if the prices stop increasing? There must be a peak, because there was only so much seeds that could go around. Scales, however, was his usual self-assured self when Goose posed the question to him. "Oh that is all right, my friend. Markets behave much like our emotions. It goes up when we are up and it goes down when we are down. Somewhere in between is the real value of the properties. Most times, when buyers and sellers begin to settle down, the prices will correct themselves naturally. Don't worry too much about it. Trust the market, for it can heal itself regardless of our excesses." "But what about the animals who have invested all their savings in the properties?" "Well, if they are smart they will sell while the market is still willing to buy. Then the properties will end up with people who actually wants to live there." Goose was pacified by Scale's explanation, though a little disconcerted by the stares of his assistant, Snow Ears. The way the rabbit's eyes were bulging, you would think that something bad was stuck in his throat. In the coming weeks, the market moved as Scales predicted. Prices plummeted and buyers scrambled to be sellers. The losses of latecomers were exorbitant, so large in fact that the average retiree lost ¾ of his or her savings. Prices continued to fall then stopped and slowly inched back up. Apparently in a bid to recoup a part of his losses, someone came up with the idea of renting out his properties instead of selling them at a loss. This was emulated by other owners and bit by bit, prices began to adjust to the monthly cost of rentals at 130 seeds per month for 5 years at the inflation rate of 2%, which meant that the market finally settled at around 7,500 to 8,000 seeds for a 6.3 square feet home. Using the following formula where,
Though it was a relief to finally see the prices settle, Goose was irked by the new market price. Why did the numbers show 16 thousand in Scales' survey? How was it possible for the market to readjust itself to such a low? Does this mean that the prices of all homes, including the existing ones before his project, had gone down too? Or could it be that this was the actual price all along? The more he thought, the more confused he got. Maybe he should ask Snow Ears about how the survey was conducted. No, that would not be right because the rabbit worked for Scales. Should he talk to Scales then?
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