Factors Determining Price of Private Housing in the UK

Economics for
Business

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY ..................................................................................................................................1
TASK 1............................................................................................................................................1
1. By using demand & supply analysis, identify the factors which determine the price of
private housing in the UK............................................................................................................1
TASK 2............................................................................................................................................5
1. Identify as well as explain the economic policies which used to stimulate the demand of
private housing.............................................................................................................................5
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Business economics is the applications of various theories in the microeconomics which
help the organizations to fill their gaps which occur due to current business practices. With the
help of business economics, management able to make rational or optimal business decisions
which helps them to analyse overall market as well as factor which impact the organizations.
Business economics linked with various economic theories which further beneficial at the time
of implementation and make decisions accordingly (Demil and et.al., 2015). This report focus on
private housing sector of UK and identify the factors which drive the demand as well as supply
of housing. Number of households will increases from 2007 to 2017 around 1.7 million which is
about 63% increase (Private Housing in the UK, 2019). This report cover various topic such as
analysis of demand and supply, how it will increase the understanding of market operations.
Along with this, identify the factors which determining the price of private housing in the UK. In
addition, it include the economic policies which used to stimulate the demand of private housing
in the UK.
MAIN BODY
Economic for business help the organization to make wider decisions in respect of the
private housing. With the help of it, business able to develop strategic decisions which maximise
the sales as well as profitability of the company (Drăgan, Ivana and Arba, 2014). In context of
private housing in the UK, builders have to analyse the statistical data, market condition, interest
rate, construction cost, stamp duty, income effect, population etc. Construction industry need to
evaluate the market condition of the housing sector where demand and supply analysis will
provide them better understating.
TASK 1
1. By using demand & supply analysis, identify the factors which determine the price of private
housing in the UK
Law of Demand: It is refer to the behaviour of customers regarding any goods &
services at the time of purchasing. According to this law, price or quantity of goods both are
constant which have inverse relationship. Rather than these factors all are constant in the short
run but in long run all are affect the demand of goods & supply. In context of privet housing,
when price of housing increases then demand of properties also decreases and vice versa
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(Demand of private housing, 2019). Below mention graph provide better understanding of
private housing demand in the UK.
Illustration 1: Demand of private housing. 2019.
(Source: Demand of private housing. 2019)
Above mention demand graph represent that when price of private housing increases
from £ 200,000 to £ 250,000 than quantity reduces from Q to Q1 which clearly mentioned in the
above graph. Price and demanded quantity have inverse relation which make the demand slope
move downward side. With the help of demand analysis, organizations able to improve their
strategies and analyse that how they able to increase demand of housing because in short run,
only price and quantity affect the demand but in long run all the factors impact the demand of
housing.
Law of Supply: It is the economic theory which refer to the behaviours of produces
which change according to the change in price of goods & services. Here price and supplied
quantity have positive relations. When price of private housing increases then supplied quantity
also increases and vice versa (Evans and et.al., 2017). In context of private housing in the UK,
constructors increase or decrease their production as per the change in housing prices. Below
mention supply curve will provide the better understanding of this concepts.
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