You are asked to examine the market for luxury housing in the southern Westchester town of Quietville. This kind of housing is said to be a normal good. In Quietville a substantial proportion of the people who buy luxury homes are people who work in the financial sector on Wall Street. With the recent downturn in the stock market, you are told that many people in the financial sector are taking home smaller paychecks. An analyst of the real estate market offers the following prediction:

Question

You are asked to examine the market for luxury housing in the southern Westchester town of Quietville.  This kind of housing is said to be a normal good.  In Quietville a substantial proportion of the people who buy luxury homes are people who work in the financial sector on Wall Street.  With the recent downturn in the stock market, you are told that many people in the financial sector are taking home smaller paychecks.  An analyst of the real estate market offers the following prediction:

"As a result of the woes on Wall Street, I believe that the price of luxury homes in Quietville will fall.  The Wall Street crowd clearly will buy fewer of these houses.  Others people (not employed on Wall Street) who buy these houses will not be affected.  Their incomes, after all, have not changed."

On a piece of paper, use a single graph to derive your conclusions about the effects of events on Wall Street and explain your agreement or your disagreement with the statement above.  Explain the logic of your answer fully, in clear English.