Housing economics (Housing Studies) - Essay Example

There is no government intervention in this economy (Grant & Vidler, 2000, p. 19). The free market system consists of four main categories of actors. They are “consumers, producers, owners of private property (land and capital) and government” (Economics, 1977). Each actor in the pure market economy is motivated their own self-interest and they take every decision based on their private gain. In this context we make an assumption of rationality. It is a very important assumption that considers that the market actors are rational in the sense that they are both consistent and transitive in the choices that they make.

If a person chooses a basket of commodities ‘X’ over a basket of commodities ‘Y’ at a particular point of time, she would choose the same basket of commodities an instant later provided that there are not any alterations made in the baskets. Secondly, if a person chooses ‘X’ over ‘Y’ and ‘Y’ over ‘Z’, he would prefer ‘X’ over ‘Z’. It is also to be noted that a rational individual would want more of a normal good (increases consumption of which gives increased utility) than less of it.

In the free market economy, any stability issue is resolved without external intervention and it is made possible through “consistent maximization of a well-ordered function, such as a utility or profit function” (Etzioni, 2010, p. 142) by the two main forces of the market; the consumers and the producers. According to the famous proposition by Adam Smith, an invisible hand works in the free market economy. The housing system in the United Kingdom is a large and complex system and includes a range of relationships between the owners and occupiers of the homes.

The houses might e occupied by the owners or might involve various rental tenures in the private sector including the “not-for profit and local authority sectors” (Diacon, Pattison & Vine, 2009, p. 6). This market consists of millions of existing