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How the theory of supply and demand affects activities in the property markets - Essay Example

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How Demand And Supply Affects Activities In The Property Markets [Your Name] [Your University] [Date] Executive Summary The concepts of demand and supply underpin the very basics of economics. In a free market economy, demand and supply interact with each other to determine the market equilibrium i.e…
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How the theory of supply and demand affects activities in the property markets
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Download file to see previous pages Interaction of the supply and demand curve for property determines the value of the property in this case. This report goes into great detail to explain the basic economic concepts of demand and supply and how they apply to the property market. Demand And Supply In The Property Market Demand and supply are one of the most basic economic concepts, yet their applicability is extremely wide spread in our daily lives. In a free market economy, it is the interaction of demand and supply which determines the quantity of goods to be bought and sold, and consequently the price at which this transaction would be carried out. This level is known as consumer equilibrium and can be shown on a graph when the supply and demand curve intersect each other. Demand simply refers to the amount of goods or service that a person is is willing and able to purchase at a given price level (Turvey, 1971). The demand for a product and its price are inversely related, that is more goods are demanded when their prices are low as compared to when their prices are high. The demand curve is a downward sloping curve with price and quantity on its axes and depicts what's just mentioned above. There are many factors which influence the demand of a product like the availability of substitute and complementary goods, tastes of people, the level of disposable income, the elasticity of demand, customer expectations and expectations of future. Supply on the other hand is related to suppliers and it refers to the the quantity of good and services that are made available by suppliers in the open market. Totally opposite to the law of demand, the supply of goods and their price are directly related, that is suppliers are willing to supply more quantities of goods at higher prices then as compared to lower prices. Consequently, the supply curve is a upwards sloping curve, having price and quantity on its axes respectively. As with demand, there are certain factors which influence the supply of a product. Some of the main factors include the price of the input, expectations of the future, the current state of technology available, the price of substitute and complementary goods and the number of suppliers in the market. Market equilibrium can be defined as the combination of quantity and price level where the quantity of goods demanded equals the quantity of goods supplied. This point can be determined on the graph where the supply and demand curve intersect each other (Turvey,1971). There are also situations when a demand or supply curve simply shifts inwards or arches outwards. A demand curve shifting outwards simply means that more quantities of goods are now demanded at the same price level as compared to before. Similarly, an outward shift in the supply curve would mean that now the suppliers are willing to supply more goods and services at the same price level as compared to before. The demand curve, for example, shifts towards the outside when the level of disposable income increases (in the case of normal goods), the price of a substitute good rises and when the price of a complementary good falls. On the other hand, outward shifts in the supply curve are usually experienced due to betterment in technology which results in lowering the cost, or when bumper crop is produced in a season. The theory of demand and supply affects activities in the property markets in pretty much a similar manner as it does in any other market. However, there are are a few different ...Download file to see next pagesRead More
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