What are the two main factors that determine prices in a market?
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Supply and Demand.
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What are the two main factors that determine prices in a market?
Supply and Demand.
Who are the main buyers in the market?
Builders and individuals.
What happens to price when demand increases and supply remains unchanged?
Price increases.
What are the reasons for changes in demand and supply?
Substitution Effect, Income Effect, and Law of Diminishing Marginal Utility.
What happens to price and demand when price increases?
Both price and demand increase.
What happens to price when supply increases and demand remains unchanged?
Price decreases.
What are some external factors that can affect demand and supply?
Government regulating prices, development control regulations, and other policies affecting price.
What are Giffen goods?
Inferior goods for which demand increases as the price increases.
What is the first step in the vicious cycle of supply and demand?
To meet increasing demand, supply is increased and the price of the product is also increased.
What is the effect on price when both demand and supply increase?
Price remains unchanged.
What is the definition of market PRICE in real estate?
The sum of money for which a dwelling unit or land is exchanged between buyer and seller.
What factors influence housing supply from builders?
The structure of the house-building industry and the willingness and ability of builders to change output volume and composition.
What does mainstream economics suggest about prices without external factors?
Prices only reflect the decisions of buyers and sellers.
What is a key assumption about Giffen goods?
Consumers must spend a large portion of their income on these goods.
What happens to demand when the price of a commodity increases?
The demand for the commodity decreases.
What occurs to price when demand decreases while supply remains unchanged?
Price decreases.
How can monthly rent be classified in terms of real estate?
As a form of price paid by a tenant to the owner of a house.
How sensitive is the supply from existing housing stock to price changes?
It is highly unlikely that supply from the existing stock is very sensitive to price changes.
Who are the main sellers in the market?
Individuals, government, and others.
Give an example of Giffen goods.
Bread, onions, and housing stock.
What occurs after demand decreases in the supply and demand cycle?
Supply decreases and eventually the price decreases.
What factors can shift housing demand and supply curves?
Factors other than price, such as income, recession, and external market values.
What does VALUE represent in real estate?
A measure of what the property is worth to the owner, tenant, or society.
What is the outcome on price when supply decreases and demand remains unchanged?
Price increases.
What primarily affects the price elasticity of supply for new construction housing?
The ability of the house-building industry to respond to higher prices.
What roles do buyers and sellers play in the market?
Buyers create demand, and sellers create supply.
What are Veblen goods?
Goods for which higher prices are paid to signal wealth rather than for better quality.
What leads to an increase in demand again in the cycle?
The decrease in price.
What factors influence the maximum amount customers are willing to pay for land?
The overall demand for housing and expected revenues from house sales.
What are some key factors that influence housing demand?
Size of the house, location, number of rooms, features like a garden, investment purpose, and market value.
Why can assessing VALUE be challenging?
Because it can be difficult to express in precise monetary terms.
What are some reasons for increased housing supply from new construction?
Higher prices, increased production, and high vacancy rates in existing stock.
What happens to price when there is an increase in demand for a commodity?
The price increases.
Give examples of Veblen goods.
Luxury cars, clothing, and watches.
What is reached when supply meets demand at an agreeable price?
An equilibrium stage.
What is the stock of land?
A fixed quantity of geographic territory that can only change through reclamation or submersion.
What is the Residual Valuation Approach?
A method to ascertain the maximum amount house-builders are willing to pay for land by calculating expected revenues from house sales minus expected non-land costs.
What three aspects impact housing demand?
Ability to purchase, willingness, and financial resources.
What is the definition of COST in the context of real estate?
The amount incurred for the production of dwelling units, including land, labor, materials, and finance.
What can lead to less supply in the housing market?
Less demand leading to less supply, and the expectation of less future profit compared to present profits.
What is one reason to increase the price of a commodity?
To reduce the overall demand.
What happens to the demand for rural housing when transport costs fall?
The demand for rural housing increases.
What does the Marshallian Cross graph illustrate?
The relationship between supply and demand.
How does the price of land affect its stock?
Change in price does not impact the available stock of land.
What does residual value represent in real estate?
Expected revenues from house sales minus expected costs of all inputs other than land.
What generally influences both individual and aggregate housing demand?
Price, availability of substitutes, and price & availability of complementary goods.
What additional expenses are included in the COST of real estate?
Any form of taxation or other expenses.
What factors can lead to changes in housing demand?
Location/job changes, changes in family size, and changes in income.
What is one purpose of property valuation?
To assess the value when buying or selling property.
Why might increasing supply not lead to increased profit?
Because increasing supply requires a lot of extra investment.
How are transport and rural housing classified in terms of elasticity?
They are considered complementary goods.
What does the intersection point of the supply and demand curves represent?
The price.
What is the supply of land?
A measure of the flow of land available to the market, which varies over time.
Why might builders be willing to pay higher prices for expensive plots of land?
Because such houses add to exotic value and generate high revenue.
How does income elasticity of demand affect housing demand?
Individuals demand more and better quality housing at higher incomes compared to lower incomes.
What role does VALUE play in land and housing finance?
It plays a very important role toward finance in land and housing.
What happens when housing prices increase?
It can lead to probable reasons for selling and increased production.
How is property valuation used in taxation?
To assess the tax of a property, such as municipal tax or property tax.
What is a second reason for increasing the price of a product?
To make more profit.
What is the effect of an increase in the price of urban housing on rural housing demand?
It leads to an increase in the demand for rural housing.
What are the two major governing factors for plots in high-density zones?
High demand for housing and the high number of dwellings that can be constructed on the same piece of land.
What factors influence the supply of land?
Price and demand for housing.
What is the expected trend in housing demand as household incomes increase?
The demand for housing is expected to increase.
What is a potential outcome of constructing housing not being very profitable?
It may lead to a shift in demand towards existing stock.
What percentage is rent usually fixed based on property valuation?
6% to 10%.
What happens to demand when the price increases?
Demand decreases.
How are urban housing and rural housing classified in terms of elasticity?
They are considered substitute goods.
How does high demand for housing affect land prices?
It increases the price of individual dwelling units, leading builders to pay higher land rates.
How does the supply of land differ from the stock of land?
Supply is a flow that varies with time, while stock is a fixed quantity.
What is the goal of government policies regarding housing?
To provide Decent Housing for All by eliminating the gap between Q0 and Qn.
What is one reason consumers may look for alternatives when prices rise?
They start preferring alternatives at lower prices.
Why is property valuation important for loans or mortgages?
It serves as security when loans are taken against the property.
What happens to the equilibrium price when the supply curve shifts from S0 to S1?
The equilibrium price falls to P1.
What is the formula for Cross Elasticity of Demand?
Cross Elasticity of Demand = % change in quantity demanded / % change in price of another good.
What is the primary goal of builders when determining land prices?
To maximize profit.
What happens to the supply of land at higher prices?
More land will be offered for housebuilding in the absence of controls.
What is one way the government can increase demand for Decent Housing?
By providing housing allowances, technological support, or loan subsidies.
What is a potential reason for a shift in the supply curve in housing?
A sudden surge in willingness of individuals to sell houses or housebuilders finding ways to develop more houses.
What is a saturation point in the context of demand?
A point where many people who could previously afford the product can no longer afford it.
What happens during compulsory acquisition of property?
Compensation is paid to the owner.
What does a negative value in Cross Elasticity of Demand indicate?
It indicates complementary goods.
What is the Inflation Rate?
The rate at which the general level of prices for goods and services rises, eroding purchasing power.
What is the impact of Development Control Regulations (DCR) on land?
DCR impacts the price of land, which in turn affects the supply.
How can the government increase the supply of Decent Housing?
By making more land available or providing subsidies and tax concessions to builders.
What happens to the equilibrium quantity when the supply curve shifts to the right?
The equilibrium quantity increases to Q1.
Name one method of property valuation.
Rental Method of Valuation.
What does a positive value in Cross Elasticity of Demand indicate?
It indicates substitute goods.
What does the Discounting Rate represent?
The interest rate used to determine the present value of future cash flows.
What does the government do to directly supply the quantity of housing needed?
It can directly supply the balance demand (Qn - Q0) with the help of various agencies.
What causes a shift in the demand curve from D0 to D1?
A sudden surge in willingness to buy more houses due to an increase in income or increased demand to live in a particular area.
What is the Direct Comparison method in property valuation?
It involves comparing the capital value of similar properties.
What is Net Present Value (NPV)?
The difference between the present value of cash inflows and outflows over a period of time.
What do D0 and S0 represent in the context of housing?
They represent the demand and supply curves for Decent Housing.
What happens to the equilibrium price when the demand curve shifts to the right?
The equilibrium price increases to P2.
What does valuation based on profit consider?
It assesses the potential income generated by the property.
What does Internal Rate of Return (IRR) indicate?
The discount rate that makes the net present value of all cash flows from a particular project equal to zero.
At what point is the quantity Q0 considered to be in equilibrium?
At point E, where the demand and supply curves intersect.
What is the effect on equilibrium quantity when the demand curve shifts to D1?
The equilibrium quantity also increases to Q2.
What is the focus of the Development method of valuation?
It evaluates the potential value of property development.
What is meant by Demand in economics?
The quantity of a good or service that consumers are willing and able to purchase at various prices.
What is the total demand for Decent Housing based on the number of households?
The total demand will be Qn, assuming that is the number of households in the area.
In the context of rented housing, what does the price represent?
The rental payment for housing.
What does the Depreciation method of valuation account for?
It considers the decrease in property value over time.
What is Supply in economic terms?
The total amount of a good or service that producers are willing to sell at various prices.
What approach do governments usually take to address housing needs?
They typically use a combination of increasing demand, increasing supply, and direct provision.
What are the initial conditions represented by D0, S0, P0, and Q0?
Initial demand, supply, equilibrium price, and equilibrium quantity.
What does Equilibrium of Demand & Supply refer to?
The point where the quantity demanded equals the quantity supplied.
What is Price Elasticity of Demand?
A measure of how much the quantity demanded of a good responds to a change in the price of that good.
What is Consumer Surplus?
The difference between what consumers are willing to pay for a good and what they actually pay.
What is Production Surplus?
The difference between the amount producers are willing to accept for a good and the actual price they receive.
What are Fixed Costs?
Costs that do not change with the level of output.
What is Marginal Cost?
The cost of producing one additional unit of a good.
What is Utility in economics?
A measure of satisfaction or pleasure derived from consuming goods and services.
What does Pareto Efficiency mean?
A situation where resources are allocated in the most efficient manner, and no one can be made better off without making someone else worse off.
What is Nash Equilibrium?
A situation in a game where no player can benefit by changing their strategy while the other players keep theirs unchanged.
