Economic Arbitrage: Real Estate

This lecture introduces the concept of economic arbitrage, where economic agents identify and compare alternatives to choose the most favorable one. It discusses the challenges in decision-making and presents a practical example of an investor choosing between real estate and financial investments. Mathematical notations are used to formalize the decision process, comparing the annual income from different investments. The difference between interest rates and returns is explained, highlighting the specificity of returns to income and price. The lecture concludes with a summary of key concepts, including the importance of arbitrage, interest rates, and returns in real estate economics.