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Real Estate Economics - Assignment Example

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This paper “Real Estate Economics” discusses the real estate industry on the basis of demand, supply, the elasticity of demand and supply, wage rates and wage inequality, how monetary and fiscal policies affect the industry and how the economy affects the industry…
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Real Estate Economics
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Download file to see previous pages The demand of houses will depend on a number of factors, one of the major factors that affect the demand of houses is the population size and population growth, other important factors that determine the demand of houses in the real estate industry include the price, the income, availability of credit and consumer preferences.
When prices are low then the higher is the demand, when the income is high then the demand for housing will be higher and finally when there are available credit services then the higher is the demand for houses. Population size and growth are the majo0r factors that determine the demand for houses in an economy, the higher the population size than the higher the demand in the real estate industry.
The income elasticity of demand is a measure of the responsiveness of demand as a result of a change in the consumer income, De Leew (1971) undertook a study in North America to determine the income elasticity for demand for houses, according to him he estimated the income elasticity of demand to be between 0.5 to 0.9, this means that the income elasticity of demand in the real estate industry is inelastic whereby the proportion change in income is greater than the proportion change in demand, however, an increase in income will lead to an increase in the demand for houses.
The price elasticity of demand is the responsiveness of demand to a change in price, Polinsky and Ellwood (1979) undertook a study in North America aimed at determining the price elasticity of demand, the price elasticity of demand was estimated to be negative 0.7, this figure means that an increase in the price for houses will definitely lead to a reduction in the demand for houses. ...Download file to see next pagesRead More
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