intro economics of built environment

Question 1

define scarcity

Answer 1

the gap between limited resources and theoretically limitless wants

Question 2

define exchange

Answer 2

a marketplace where securities, commodities, derivatives and other financial instruments are traded. The core function of an exchange is to ensure fair and orderly trading and the efficient dissemination of price information for any securities trading on that exchange

Question 3

define choice

Answer 3

when an individual makes a decision based on subjective preferences. People make choices based on what they think will provide them with the most satisfaction

Question 4

Micro economics

Answer 4

individual behaviour, looking at individuals or individual businesses. Looks at supply and demand, pricing, elasticity, consumer behaviour and market structures

Question 5

Macro economics

Answer 5

looking at the bigger economy e.g. inflation, economic growth (GDP), unemployment. the whole economy

Question 6

positive economics

Answer 6

The study of economics based on objective analysis of WHAT IS, and what has been occurring in an economy. Relies on data and facts and its is testable.
Examples – a decrease in interest rates leads to an increase in spending

Question 7

normative economics

Answer 7

normative economics involves subjective, opinions and value judgements about what ought to be
Example – government should increase minimum wage to decrease poverty

Question 8

what are the two idealised economic systems?

Answer 8

Centrally planned model
Free market model
*No market will be 100% either, usually a mix

Question 9

define GDP

Answer 9

Gross Domestic Product
The sum of the values of all the products and services in a given period
UK currently around 3.1 trillion USD

Question 10

define GDP per capita

Answer 10

An average. Total GDP divided by the population
UK currenlty around 46,100 USD

Question 11

why is the property market imperfect?

Answer 11

*Due to information not always being available
*Uneducated buyers
*THE MARKET IS VERY SLOW AS BUILDING TAKE A LONG TIME TO BUILD
*Difference in product quality
*a housing transaction typically involves several parties. More importantly, each party may have conflicting interests.

Question 12

typical duration of a housing investment

Answer 12

A house is typically consumed over decades and a housing investment is made over an average of 20–30 years.

Question 13

what are the four sections (sub markets) of the property market?

Answer 13

1.The owner-occupied sector – made up of households that own their properties either outright or once they have paid off a related mortgage.
2.The private rented sector – comprising privately owned property that is let out at a market rent.
3.The housing association sector – made up of property managed by non-profit making organisations that use a mix of public and private funds to provide accommodation at a ‘fair ’ rent.
4.The local authority rented sector – comprising housing stock made available by local authorities (councils ) that is let out at rents subsidised from public funds.

Question 14

what is the basic law of demand

Answer 14

The law of demand, as price goes up, demand goes down

Question 15

roughly how many commercial buildings are there in the uk

Answer 15

There are approximately 2 million commercial buildings in the UK and the majority of these are rented.

Question 16

what is ceteris paribus

Answer 16

“all other things being equal” latin
*Economists isolate the relationship between two variables by assuming ceteris paribus – ie all other influencing factors are held constant.
*“If the price of milk falls, ceteris paribus, the quantity of milk demanded will rise.
*^^^^^^^^ This means that, if other factors, such as deflation, pricing objectives, utility, and marketing methods, do not change, the decrease in the price of milk will lead to an increase in demand for it

Question 17

what does a product demand curve tell us

Answer 17

how many units consumers are willing and able to buy at each price

Question 18

what does a product supply curve tell us

Answer 18

how many units producers are willing and able to sell at each price

Question 19

in a demand curve, what does a line going down represent

Answer 19

a negative relationship between price and quantity demanded.
as price goes up, the quantity demanded is less

Question 20

in a supply curve, what does a line going up represent

Answer 20

a positive relationship between the price of a good or service and the quantity supplied of that good or service.
an increase of the price of a good leads to an increase in the supply of that good

Question 21

what does WTP stand for

Answer 21

willingness to pay

Question 22

what is the point of equilibrium

Answer 22

At the point of equilibrium, supply perfectly meet demand. Equilibrium price is also called market clearing price because at this price the exact quantity that producers take to market will be bought by consumers, and there will be ‘no left over’.

Question 23

what is elasticity

Answer 23

The elasticity of supply measures how responsive the quantity supplied of a good is to changes in its price.

Question 24

what two words can describe the property market

Answer 24

imperfect and ubiquitous

Question 25

what are characteristics of physical property

Answer 25

fixed location and dual components

Question 26

why is choice necessary in economics

Answer 26

resources are scarce

Question 27

does the supply curve go up or down

Answer 27

up

Question 28

does a demand curve go up or down

Answer 28

down

Question 29

in a demand curve, will a change in price cause the line to move or shift

Answer 29

a movement along the demand curve

Question 30

in a demand curve, will a change in a non price factor cause the line to move or shift

Answer 30

a shift in the demand curve

Question 31

define substitute goods

Answer 31

two products that can provide the same level of satisfaction so they can replace eachother.

Question 32

does a typical supply curve go up or down?

Answer 32

Up

Question 33

does a typical demand curve go up or down?

Answer 33

Down

Question 34

when is demand considered to be inelastic

Answer 34

Demand is considered inelastic if the demand for a good or service remains unchanged, even when the price changes
examples are insulin or other medicines, tabacco

Question 35

what are normal and inferior goods

Answer 35

*A normal good is a good that experiences an increase in its demand due to a rise in income.
*If there’s an increase in wages, demand for normal goods increases while conversely, a decline in income or unemployment will lead to a reduction in demand.

*Inferior goods are the opposite of normal goods
*If your income increases, you reduce your consumption of the product as they are low quality product
*When you income increase you will shift towards high quality products
*E.g. second hand clothes or frozen vegetables

Question 36

what is a mixed economy

Answer 36

a mix of free market economy and command economy
more than half is carried out by private enterprise while the rest the government is directly responsible for

Question 37

what is an oligopoly

Answer 37

a state of limited competition where few companies hold the majority of the market share

Question 38

what are causes of inflation

Answer 38

Causes of high inflation

⁃ COVID-19, rises in energy prices a post-pandemic drop in the labour force.

⁃ The UK faced unique challenges, having both the US-like tight labour market and the European-style energy market.

⁃ Concerns over wage growth potentially causing further inflation

Question 39

what is derived demand

Answer 39

A term in economics that describes the demand for a good or service that is a result of the demand for another related good or service:
e.g. When we buy retail property, the initial demand is for the profit of selling goods.

Question 40

how do you determine the value of a property in terms of rent and yield

Answer 40

Rent divided by yied = value of the property

Question 41

what are the stages of development

Answer 41

initial concept
implementation
construction
disposal (letting and/or sale)

Question 42

what risks must a developer consider

Answer 42

project
- physical
- legal
- market
- planning
financial
- appraisal
- funding

Question 43

what is the split between residential and commercial property in the UK

Answer 43

Commercial property represents around 13% with around 55% of this being ‘investable’. The residential market accounts for the other 87% and 63% of which is owner-occupied.

Question 44

what is liquidity in real estate

Answer 44

Liquidity is a characteristic of assets that determines how quickly they can be sold at close to ‌market price. The less time it takes to sell, the higher the liquidity

Question 45

what are business fluctuations

Answer 45

Business fluctuations in the context of real estate refer to the periodic up-and-down movements in economic activity that affect the demand, supply, and prices of real estate properties. These fluctuations are typically driven by changes in the broader economy and are often referred to as economic cycles or business cycles, which consist of periods of expansion (growth) and contraction (recession).

Question 46

does a higher GDP typically coincide with a higher or lower quality of living

Answer 46

higher