Do high house prices in Trafford deter key public sector workers from seeking a job in the area?

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GCSE Economics Coursework

Do high house prices in Trafford deter key public sector workers from seeking a job in the area?

Contents

Introduction

The price of housing in Trafford deters key public sector workers from seeking a job in that area. I will be investigating the relationship between house prices in Trafford and key public sector workers in Trafford. The house prices in Trafford are the highest in all of Greater Manchester and this could prevent public sector workers seeking work in Trafford. In order to investigate this I will:

  • Identify and highlight key terms
  • Research how house prices are determined and house prices in Trafford
  • Use supply and demand diagrams to illustrate the housing market
  • Conduct research into key public sector workers
  • Relate the research to the hypothesis
  • Describe any other problems and any government intervention that may be suitable

I predict that public sector workers will be deterred from seeking work in Trafford due to house prices. House prices are higher in Trafford than anywhere else in Greater Manchester, as seen on page 4. Because of this, public sector workers may be more inclined to seek work elsewhere.

Key Terms

Demand

Demand is the quantity of a particular product or service that a buyer is willing and able to buy at a certain price. If all other factors remain equal, the higher the price of a good, the less people will demand that good. This is because if price increases, so does the opportunity cost of buying that good, so less people will buy. The supply and demand diagram above shows the relationship between demand and price.

Supply

Supply is the quantity of a product or service that is offered for sale by the market at a certain price. If all other factors remain equal, the higher the price of a product or service, the more will be supplied. This is because if prices are higher, more profit can be made by suppliers so they will supply more. The supply and demand diagram above shows the relationship between supply and price.

Equilibrium

Equilibrium is the price at which demand is equal to supply. On the diagram above the equilibrium price is P. If demand is not equal to supply there will either be excess demand (too much is demanded by consumers and not enough supplied) or excess supply (too much supplied and not enough demand for all the goods).

Elasticity

Elasticity refers to how responsive the quantity supplied or demanded of a product is to a change in another factor, e.g. price. If price of a product changes by a small amount and the demand changes by a lot then the product is said to have a high price elasticity of demand.

Market Failure

Market failure is when the market does not allocate scarce resources efficiently. Efficiency in this context is concerned with how well resources such as time, labour and materials are used to produce goods or services. It can occur because of lack of competitions (in monopolies and oligopolies), lack of knowledge and information, externalities and inequality

Mortgages

A mortgage is a way to use one's real property, like land, a house, or a building, as a guarantee for a loan to get money. Many people do this to buy the home they use for mortgage: the loan provides them the money to buy the house and the loan is guaranteed by the house. “In a mortgage, there is a debtor and a creditor. The debtor is the owner of the property, while the creditor is the owner of the loan. When the mortgage transaction is made, the debtor gets the money with the loan, and promises to pay the loan. The creditor will receive money back with interest over time (usually in payments made each month by the debtor). If the debtor does not pay the loan, the creditor may take the mortgaged property in place of the loan.”[3] There are a few types of mortgages available.

Variable Rate Mortgages are the most common type of mortgage. The interest rate of the mortgage is linked to the base rate set by the Bank of England. Currently due to the economic cycle the base rate is very low. These are the most common type so they are the most competitive, and can be the cheapest. However there is some uncertainty as the base rate can change.

An alternative is a fixed rate mortgage. This is when the interest rate is fixed and the base rate doesn’t affect your mortgage. This type doesn’t have the uncertainty that a variable rate mortgage has.

Mortgages can also be repaid interest only. This is when over a certain period of time, only the interest is paid. The loan is paid at the end of the mortgage period. These mortgages are more risky as you need to save up enough money to repay the loan at the end of the mortgage.

Trafford

Trafford is a ‘metropolitan borough’ in the south west of Greater Manchester. A 2007 estimate of the population of Trafford is at 212,800. [1] Its area is 40.9 square miles (106.04 km2). [1] There are 73 primary schools in Trafford, 17 secondary and , and 6 special schools. [1]

[7]

House prices in Trafford

[4]

This shows that the house prices in Trafford are higher than the rest of Greater Manchester. Trafford has seen the biggest annual decrease in house prices but they have increased the most during the last quarter, which may be a better figure to use because they could increase further. An increase in prices can be caused by a decrease in supply or an increase in demand. There might be less empty houses and more people buying.

Number of Properties Sold in Trafford

[5]

This graph shows an increase in sales during 2009 which is an increase in demand. This can lead to an increase in price.

Key Public Sector Workers

The Public Sector

The public sector includes all workers employed in the civil service, the health services, education, defence, non-commercial and commercial state bodies and those employed in the local authorities. Jobs that are defined as a key worker include:

  • Nurses and Paramedics and other NHS staff with the exception of doctors and dentists
  • Teachers and nursery nurses (in schools including further education and 6th form colleges)
  • Police officers and community support officers
  • Social workers
  • Local authority planners
  • Firefighters and other uniformed staff below principal level in Fire and Rescue Services
  • Connexions personal advisors
  • Qualified environmental health officers/practitioners who work in a local authority, government agency, NHS or other public sector agencies
  • Highway Agency traffic officer staff in safety critical roles within the traffic officer service [2]
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These key public sector workers are essential for our society. For example, teachers are needed to educate our children and doctors are needed to provide healthcare for our population. Because they are so essential, changes in salary will not affect the government’s demand for these workers, therefore demand for public sector workers is inelastic and their jobs are much more secure than private sector jobs. This is represented by the diagram on the right. If workers are demanding a higher salary, P1 to P2, demand will only decrease by a small amount from Q1 to Q2.

This means ...

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