Factors that influence the Price of Houses.
Contents . Introduction Pg 3 2. How houses are affected by demand and supply Pg 4 3. Inflation Pg 8 4. Consumer Confidence Pg 9 5. Affordability Pg 10 6. Interest Rates Pg 11 7. Average Property Prices in the UK Pg 12 8. Size and Type of Properties Pg 13 9. Economic Growth Pg 14 0. Conclusion Pg 15 Introduction The question that is to be investigated in this project is 'What factors determine the price of houses?' I have made a hypothesis from this question that I will later prove or disprove in my investigation. My hypothesis is: House prices are mainly determined by mortgage rates. To collect my information I will use a wide range of resources. These will be: · The Internet, particularly specialised sites dealing in economics (e.g. www.bized.ac.uk,). Also property sites that give
Explain why the control of inflation is an important objective of government economic policy.
a) Explain why the control of inflation is an important objective of government economic policy. Although monetary policy can be used to affect many things, the main objective of monetary policy is the control of inflation. The target for inflation set by the government is 2.5%. Ever since the UK fell out of the Exchange Rate Mechanism (ERM) in September 1992, UK monetary policy has involved using interest rates to control the level of inflation. There are very close links between the rate of interest, the money supply and the exchange rate. At times when the UK has been tied to a fixed exchange rate system (like the Bretton Woods system after the Second World War, and, more recently, the ERM), both the rate of interest and the supply of money have to be adjusted to maintain the goal of the fixed exchange rate. When the UK was part of the ERM from 1990 to 1992, the UK government effectively lost control of interest rates and, to a certain extent, the supply of money. So, a government's monetary policy consists of the control of interest rates, the money supply or the exchange rate. It is difficult to control two or more of these things at once. UK monetary policy - from 'Thatcher's experiment' to the ERM The policy of controlling the money supply of the early 80s did not quite work as intended. Nigel Lawson, the Chancellor at the time, decided to 'shadow' the Deutschmark
Explain the various factors that would lead to an increase in the size of the Deficit on the Current Account of the Balance of Payments.
Explain the various factors that would lead to an increase in the size of the Deficit on the Current Account of the Balance of Payments The current Account is a key indictor for the British economy. It is the sum of four separate trade balances between the UK and the Rest of the World. The Current Account records the exports and imports of both visible invisible items. Therefore a deficit on the Current Account occurs when we was a country are either importing too many goods and services from abroad, or are not exporting enough, usually it is a mixture of both. UK consumers have a high income elasticity of demand therefore the demand for imported goods increases, also as people feel more wealthy they are more likely to spend on luxury goods such as holidays abroad. These holidays are also made to look more attractive with the advertising campaigns by companies. Companies that rely on imported raw materials and components in order to increase their productive output add to the size of the current account deficit. As UK consumers have a high-income elasticity of demand and the UK producers have insufficient capacity to meet the demand from consumers then imports will come in to satisfy the excess demand. If the pound is strong in the economy then foreign imports will be cheaper therefore will be more attractive to the UK consumers as they are more competitive within the home
external influences
External influences Competition All businesses face competition. Competition can be local, national or international. Competition is the main reason why shops close down or expand. The most competitive business will be the most efficient. With 44 stores located in 38 towns around the United Kingdom, Richer sounds still have competitors. Because richer sounds is trying to offer their customers the best value and quality possible and the best customer service, the marketing and sales department sends out a mystery shopper to check upon the local competitors. Three ways which are used to check upon the competition are: * Each store has to check the prices of competitors in their area and fax a weekly competition checklist to Purchasing. * From time to time carrying out official benchmarking exercises when checking the prices advertised by competitors and see how to compare it. * A mystery shopper also visits the competitor's stores to check their customer service and compare it with theirs. Richer Sounds stores must take action if a competitor is offering the same product for a lower price and cut the competitor by around £10 depending on the products cost. It must then inform Purchasing, in writing, that it has taken this action. Purchasing will compare this price against the information received by other stores in the weekly checklist and richer sounds will then
External influences
NAME: Lashana Ricketts FORM: 10LE TEACHER: Mrs. Barton ECONOMIC CONDITIONS ) Why do UK businesses need a stable economy? The economy is a delicate balance. The factors that are depending on a stable economy are: * The level of inflation- i.e. the level of price rises each year * The level of interest rate- how much it cost to borrow money * The strength of the £- which affects the exchange rate- the cost of trading with overseas countries. The UK businesses need a stable economy because if the economy were not stable, businesses would loose out. E.G. if interest rates were high businesses would not be able to borrow money for them to develop their businesses. So a stable economy ensures that businesses in the UK will be able to expand their companies. 2) Explain the current interest rate? Why is a high interest rate bad for your businesses? The interest rate is measured as a percentage and is the cost of borrowing money. The current interest rate for the UK is 3.75%; if the interest rate were higher it would be really bad for the economy. The higher the interest rate, the more expensive it is to borrow money. With a high interest, the less a business wants to borrow and invest and also expand their companies. So if both my businesses, The Body Shop and GUCCI were to borrow money at a high interest rate then they would have a problem because it interest rate would
Describe the Advantages of a Market Economy
Advantages of a Market Economy There are many different types of economies because each economy is based on the values and political systems of the country. However, all countries struggle with scarcity and with how to best use their resources of land, labour and capital. In the command economy, the government decides what will be bought and sold. The market economy allows economic decisions to be made by individuals with very little government interference. In the mixed market economy, economic decision making is divided between government and individuals. I believe that the market economy best meets the needs of society. One aspect of quality of life that the market economy addresses really well is political freedom. Because politics is such a ‘dry’ subject that very few people enjoy, a country’s leaders are not necessarily the people best fit for the task; they are simply the ones who are interested in doing it. Therefore, having little government involvement means that the people who would be better fit for such a task have the oppourtunity to participate in the politics of a country without so much effort, This system most accurately reflects the views and trends of the general public than one with more government involvement. Another advantage to a marked economy is that it provides religious freedom. Because the government has very little influence,
Economic Competitiveness.
ECONOMIC COMPETITIVENESS Economic Development Hong Kong is characterised by its high degree of internationalisation, business-friendly environment, rule of law, free trade and free flow of information, open and fair competition, well-established and comprehensive financial networks, superb transport and communications infrastructure, sophisticated support services, and a well-educated workforce complemented by a pool of efficient and energetic entrepreneurs. Added to these are substantial fiscal reserves and foreign exchange reserves, a fully convertible and stable currency, and a simple tax system with low tax rates. A Free Economy Hong Kong has retained its rating as the freest economy in the world in the 2003 Index of Economic Freedom released by The Heritage Foundation, for the ninth consecutive year. The Cato Institute in the United States, in conjunction with more than 50 economic institutes world-wide, also ranks Hong Kong as the world's freest economy. The International Monetary Fund classifies Hong Kong as an advanced economy. Other highly regarded institutions - like the World Economic Forum, the International Institute of Management Development and the Economist Intelligence Unit - also identify Hong Kong as one of the world's most competitive business environments. And Hong Kong is the best-performing host economy for foreign direct investment (FDI) in Asia,
Economics Portfolio
Chosen Article Wal-Mart's hot on India No. 1 retailer sings nation's praises to analysts; calls market a 'huge organic growth opportunity.' June 6, 2006 1:27 PM EDT By Parija Bhatnagar, CNN/Money staff writer NEW YORK (CNN/Money) - Has Wal-Mart tapped India, the second most-populous and fourth largest retail market in the world, to some day become the jewel of its corporate crown? Maybe, or at least that's the impression John Menzer gave last week when the president and CEO of Wal-Mart's international operations dedicated a substantial portion of his presentation to analysts talking exclusively about his recent trip to India -- charts and photos included. It's interesting to note that besides India, Menzer also made pit stops to China and Korea, but those two countries only received a cursory mention during his 30-minute speech as part of Wal-Mart's annual meeting with shareholders and analysts. Menzer's heavy pitch of India came soon after he headed a delegation to the subcontinent last month, which also marked the first Wal-Mart (Research) executive visit to the country. Said Menzer, "India represents a $250 billion retail market, growing 7.2 percent a year, but modern retailing is just starting to emerge This shows us that India is a huge organic growth opportunity for Wal-Mart." But it's not without some challenges, Menzer added, noting that the supply
Economies of Scale
Economies of Scale These occur when mass producing a good results in lower average cost. Economies of scale occur within an firm (internal) or within an industry (external). Internal Economies of Scale These are economies made within a firm as a result of mass production. As the firm produces more and more goods, so average cost begin to fall because of: * Technical economies made in the actual production of the good. For example, large firms can use expensive machinery, intensively. * Managerial economies made in the administration of a large firm by splitting up management jobs and employing specialist accountants, salesmen, etc. * Financial economies made by borrowing money at lower rates of interest than smaller firms. * Marketing economies made by spreading the high cost of advertising on television and in national newspapers, across a large level of output. * Commercial economies made when buying supplies in bulk and therefore gaining a larger discount. * Research and development economies made when developing new and better products. External Economies of Scale These are economies made outside the firm as a result of its location and occur when: * A local skilled labour force is available. * Specialist local back-up forms can supply parts or services. * An area has a good transport network. * An area has an excellent reputation for producing a
The Euro.
The Euro: In November 1997 Gordon Brown outlined five economic tests (and passed or failed them) that would be used by the Government to gauge whether the UK economy was ready to join the Euro.4 This essay seeks to analyse these five tests and explore the issue of which will be the biggest problem for entry into the Euro. To do this I will address each of the five tests in turn and briefly comment on how the UK has fared against them. I will then conclude as to which is the most problematic test and detail why I think this is the case. The 5 tests are: Convergence - Is there sustainable convergence between the UK and the Euro-zone economies? The UK has moved much closer to the Euro-zone since 1997, when this test was failed by Gordon brown. From the chart below it can be seen interest rates between the UK and Germany are clearly converging. The gap between interest rates in the UK and the Euro-zone was 3.75 points it is only around 1.5 points now (though the recent UK rise widened the gap). Inflation rates have also significantly converged over the period; the fact that the UK will soon adopt the inflation target of the EU is another step towards convergence. The evidence seems to point to increased convergence with the Euro-zone as we work ever more closely with Europe. Assuming trends continue this test should not prove too much of a problem, however although
