• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Explain using economic analysis what determines the price of owner-occupied houses in the UK.

Extracts from this document...

Introduction

a) Explain using economic analysis what determines the price of owner-occupied houses in the UK A market exists wherever there are buyers and sellers of a particular good. The buyers demand the goods from the market whilst sellers supply goods onto the market. Price is the market value of the good and is decided depending on the changing conditions of demand and supply. The law of demand states that more will be demanded the lower the price when all other things remain equal - ceteris paribus. The law of supply states that the more that is supplied the higher the price. As these two factors change, the price of the product changes. Where the curves on the graph cross it is known as the equilibrium price. This is where demand equals supply. Changes in demand and supply will lead to new equilibrium prices being set. A change in demand will lead to a shift in the demand curve, a movement along the supply curve and a new equilibrium price. If given a choice, consumers in the UK would prefer to own their own homes rather than rent. ...read more.

Middle

This meant people saw houses less as an investment as the prices weren't rising as much. This lead to a decrease in demand. A decrease in demand would cause the demand curve to move to the left, causing a decrease in price. The fourth factor that effects demand is interest rates. When consumers buy a house, they usually need a mortgage. This is a way of borrowing money to buy property. When potential buyers are looking to buy a house they look at the price of the monthly payments on the mortgage as much as the price of the house. When interest rates rise, the amount paid in monthly repayments rises. This leads to a decrease in demand for owner occupied housing. People have to pay more each month which makes buying a house less attractive. A decrease in demand would cause the demand curve to move to the left, causing a decrease in price. The price of items is determined not only by the demand for the product but by how much can be supplied. How much can be supplied is very influential on the price. ...read more.

Conclusion

The third factor affecting supply is new Government legislations. In 1980, the Government gave tenants the right to buy their council houses. This led to an increase in the number of houses in the owner-occupied market. This led to over one and a half million houses becoming owner occupied. This legislation bought in by the Government has increased the supply of housing. An increase in supply would cause the demand curve to move to the right, causing a decrease in price. The fourth factor affecting the supply of housing in the UK is the Government subsidies. The Government have many schemes to try and improve the UK's less profitable areas by paying businesses to build there. This includes building businesses to improve employment in these areas and houses for these people to live. This has led to an increase in housing as building has become more profitable for companies who are receiving subsidies from the Government. An increase in supply would cause the demand curve to move to the right, causing a decrease in price. The price of owner occupied housing is determined by how much is demanded compared to how much is supplied. As the demand and supply curves fluctuate, the price of owner occupied housing imitates these movements. Sophie Bradstreet 12JCh ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level Marketing & Research section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level Marketing & Research essays

  1. Strategic Analysis of Woolworths

    One of Woolworths' critical success factors that outperform its major competitors such as Coles is its resources. Providing customers with a wide range of products and efficient service, adding a wide range of services such as home-delivery and discounted fuel offer (Woolworths, 2007)

  2. Marketing analysis of Marlboro cigarettes

    Yet, it seems that the image of Marlboro presents itself in a way that no one who smokes Marlboros is ever alone. There is a sort of collective independence among those loyal to the brand. This has been presented in the advertising as either an implicit feature, as through the

  1. GLOBAL STEEL INDUSTRY DEVELOPMENT

    well as provide technical support and trained manpower to the steel producing and consuming sectors. The following institutes have been set up: (i) The Institute for Steel Development and Growth (INSDAG), Kolkata (West Bengal): This is meant to promote usage of steel primarily in the construction industry by producing working designs and updating Engineering College syllabi.

  2. UK Housing Market

    has been a long period of stability, therefore people may expect this and not make the move to buy a house and carry on observing the market. Decreasing unemployment levels would be another factor which contributes to an increased demand for houses, as there would be more people with a

  1. McDonalds in the UK and McDonalds in India will be used to describe the ...

    Generally this measures the increase in demand for goods and the increase in supply for goods as a result. However growth can also be due to the population growing or an introduction of new products and services. This will usually take figures from the GDP measure and analyse the reasons

  2. Applied Business Studies

    To keep customers happy, the attitude of staff must be correct, as the customers will dislike rude and arrogant staff members when they ask for assistance. Another way to keep the customers happy is to improve the overall efficiency of the organisation, for example, the speed of service and staff expertise.

  1. Marketing assignment - analysis of lastminute.com

    With an increasingly global economy and more and more choices for consumers, companies must be willing to adapt their market orientation to stay competitive. The benefits of market orientation are: â The chances of newly developed products failing in the market are much reduced - but not eliminated - if effective market research has been undertaken first.

  2. Factors Affecting the UK as a Tourist Destination.

    Source - http://www.guardian.co.uk/uk/2011/apr/29/royal-wedding-tourism-boost The upcoming 2012 Games will, but also had already a positive impact on UK tourism, according to the published survey commissioned by Visit Britain. The survey covered people from 35 countries, of those who said they wanted to visit the UK; one in three cited the Games as their main reason for coming.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work