Industry Project into the Market for Housing in Australia
Identify the market structure of this industry. Explain how you reached your decision using economic theory and facts.
Talking about a single-unit house market or a company would mean that it is not as complicated and extensive when it comes to the population size. Therefore, this would mean that the market or company structure for such a market as well needs to be a direct one and not a complex neither a complicated structure as well. Therefore, this would mean selecting any of the market or organization structures that are not complex or complicated. Consequently, we may choose a hierarchial or straightforward kind of structure. This is a simple structure to mean that all the decisions are made from the above one arm management that could even comprise of a single manager or head of the company or the market as well. This decision may have been influenced by what the economic theory tends to suggest that closed labor has a wage structure whereby the workers’ wages are raised and that of the substitute lowered, to mean that the workers within the market structure would be reporting directly to the top manager, having no line managers or supervisors, hence it can be as well be referred to as both simple, hierarchical and closed market structure.
Is the price elasticity of demand for single-unit houses likely to be elastic or inelastic? Justify your answer using two determinants of the elasticity of demand.
The price elasticity of demand for single unit houses may be going to be inelastic. People are willing to pay a premium to purchase a landed property that comes with land and property on top. If there is an increasing trend for people to buy more off single unit houses (changing consumer taste), they will demand many more of the single-unit homes, and demand is going to be inelastic. If the segment of the consumers demanding the single-unit houses has a very high income, the demand will likely be inelastic.
Using the market for house construction as a basis, identify and analyze one crucial condition of demand and one of supply that may have contributed to this extraordinary rise in house prices.
One of the things that caused house prices to soar was among them the great recession, which was followed by a financial crisis, then came the housing market crash. These occurrences were a direct result of the law of supply and demand.
At the time before the financial crisis, consumers were enjoying low borrowing rates. Banks were offering low mortgages and were eventually told to lower their borrowing rates. People who previously could not afford homes were now able to provide homes. They were able to acquire homes at low prices of down payments and low credit scores.
During this time, provisional buyers began entering the market, creating a demand for houses, thereby cutting into the available supply. All of this, in turn, drove prices up to very lofty levels.
The market eventually could not keep up, and the investors on board were just after making money. A lot of them opted to buy and flip homes in a short time. Demand for houses began to drop, and so were the prices affected
Briefly define allocative efficiency. Identify and explain two sources of allocative inefficiency in the housing market.
Allocative efficiency is known as an economic concept that comes about as a result of the production of output is close to that of marginal cost. In such a scenario, the amount consumers are willing to pay almost similar. In this case, the price the consumers are willing to pay is to the marginal utility they derive from the good or the service. Therefore the principle of allocative efficiency sure guarantees that resources are appropriately allocated. Funds are awarded based on the needs and wants of consumers. In economic terms, the allocative efficiency is defined as the utility derived from the consumption of an excellent or service with respect to a certain level of price.
Briefly analyze one policy action the government and /or another organization can take to improve allocate efficiency. Will this policy significantly reduce prices and enhance allocate efficiency? Discuss.
The government can look into the matter of taxation as a way of reducing prices for housing in Australia. The high rate of tax makes it virtually impossible for most people to own homes as this affects house prices. The principle of allocative efficiency sure guarantees that resources are appropriately allocated. Resources are awarded based on the needs and wants of consumers. In economic terms, the allocative efficiency is defined as the utility derived from the consumption of an excellent or service with respect to a certain level of price.
Name and briefly discuss one policy action the government can take, which may significantly improve and sustain housing affordability. Once again, consider all housing.
Having affordable hoses is increasingly becoming hard and facing a lot of challenges. In Australia, sustainable housing has often targeted the high-end market. Affordable housing, in this case, means small housing units, low-cost materials, and small blocks built on cheap land at the periphery of the city. The very need to have a sustainable residential design, such as increasing density, mixed-use, and proximity to public transport, are increasingly adopted in Australian cities. The question still lingers on affordable housing, which the government needs to place more focus on. Taxation and income inequality needs to be addressed as a way of improving and sustaining affordable housing