intro economics of built environment Flashcards
define scarcity
the gap between limited resources and theoretically limitless wants
define exchange
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
define choice
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
Micro economics
individual behaviour, looking at individuals or individual businesses. Looks at supply and demand, pricing, elasticity, consumer behaviour and market structures
Macro economics
looking at the bigger economy e.g. inflation, economic growth (GDP), unemployment. the whole economy
positive economics
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
normative economics
normative economics involves subjective, opinions and value judgements about what ought to be
Example – government should increase minimum wage to decrease poverty
what are the two idealised economic systems?
Centrally planned model
Free market model
*No market will be 100% either, usually a mix
define GDP
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
define GDP per capita
An average. Total GDP divided by the population
UK currenlty around 46,100 USD
why is the property market imperfect?
*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.
typical duration of a housing investment
A house is typically consumed over decades and a housing investment is made over an average of 20–30 years.
what are the four sections (sub markets) of the property market?
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.
what is the basic law of demand
The law of demand, as price goes up, demand goes down
roughly how many commercial buildings are there in the uk
There are approximately 2 million commercial buildings in the UK and the majority of these are rented.
what is ceteris paribus
“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
what does a product demand curve tell us
how many units consumers are willing and able to buy at each price
what does a product supply curve tell us
how many units producers are willing and able to sell at each price
in a demand curve, what does a line going down represent
a negative relationship between price and quantity demanded.
as price goes up, the quantity demanded is less
in a supply curve, what does a line going up represent
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
what does WTP stand for
willingness to pay
what is the point of equilibrium
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’.
what is elasticity
The elasticity of supply measures how responsive the quantity supplied of a good is to changes in its price.
what two words can describe the property market
imperfect and ubiquitous