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Construction Economics - Assignment Example

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Contents Index Pages 1. Introduction 2 2. Economic activity of Government and the Construction industry 2 3. Government Intervention 6 4. Factors affecting economics of construction industry 7 5. Price Determination in Construction Industry 9 6. Allocation of Resources 10 7…
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Construction Economics
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Download file to see previous pages These economic cycles form an important feature of a market driven economy. When the economy is booming the industrial sector achieves maximum growth and is said to be achieving its maximum potential. The total market value of all commodities and services that are provided within a country during a set financial period is defined as the country’s GDP or gross domestic product. (Best Aaron, 2007) Economic activities of the Government and the construction industry It is not always the policies followed by the government that affect economic activity. There might be several impediments happening in the international front affecting the construction industry. Recession is a key index that needs to be keeps a tab regarding the performance of an economy and how the economic activities of the government are affecting the industry as a whole. Some of these Recessions’ that the government needs to keep a tab on are (Blake et al, 2004) 1. Inventory Recession- Too much optimism regarding the future growth and potential of the market can cause an increase of production foreseeing future market prices of raw materials. This can lead to overstocking of both raw materials and finished items. However if the markets are not expanding with the same potential it leads to accumulation of stock leading to recession. 2. Rolling Recession- Due to an economic slowdown several sections of an economy are hit each to a certain degree which varies according to the nature of each sector. This dip in activity in one sector can severely hamper the prospects of another sector since all industrial processes follow close synergy of activities. Recovery in one sector might not lead to the same taking place in another sector. (Blake et al, 2004) 3. Unexpected political events, elections, wars, coups, natural and manmade disasters can also cause severe impediments in economic activity. 4. Wrong Government Policies- Every government follows a monetary and fiscal policy that it deems is best suited for that country. However mistakes on this front cause the government in incorrect borrowing and lending of money. This leads to extremely large fiscal deficit making the economy severely handicapped.( Verick Sher and Islam Iyanatul, 2010) 5. All banks operating in the public and private domain are assessed and regulated by institutions under the government. Inefficiency of these institutions leads to banks lending without assessing the paying capacity of customers. This can cause huge liability to the banks if the loans are not fully recovered. Instability in banks leads to capital shortage for industrial and construction development. 6. The vagaries of oil production in the OPEC countries can cause fuel price to shoot up severely. These activities directly affect the cost of construction raw materials since a large part of construction activity deals with transportation of raw materials to site. This therefore adversely affects all construction related activities. 7. Seasonal variations are inevitable and are beyond the realm of government control since there would be months during a financial periods which experiences hectic activity usually during festival seasons followed by moths of dullness. This can cause seasonal variations in economic cycles. However, how much of this dip would affect the general economy of a country depends on the policies followed by the government and the robustness of the industrial sector at that given point of time. (Blake et al, 20 ...Download file to see next pagesRead More
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