Factors Determining Price of Private Housing with Demand & Supply Analysis

Economics for
Business

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
TASK 1............................................................................................................................................1
1. Identify factors which determine the price of private housing with the help of Demand &
Supply analysis............................................................................................................................1
TASK 2............................................................................................................................................7
1. Explain government/ economic policies that used to stimulate the demand for private
housing in the UK........................................................................................................................7
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
In the current business environment, economics used to analyse the concept of demand or
supply in the market which impact the product as well as profitability of the company.
Economics includes various practices which help the organization to formulate strategies and
identify those factors which can impact the business operations (Cleff, 2014). In order to know
about effect of demand or supply of goods & services on their business, top management deeply
research about that how price of private housing impact the economy of UK. This project report
include various topics such as using supply & demand analysis in order to identify those factors
which impact the price of private housing in the UK. In addition, it covers the government
policies which used to affect the demand for private housing in the UK.
MAIN BODY
TASK 1
1. Identify factors which determine the price of private housing with the help of Demand &
Supply analysis
Economics is the study of various theories and practices which followed by the industry
in order to make their strategies accordingly but before that they have to evaluate market trends
and current situation in context of demand or supply. It further helps in making effecting
decisions in context of organizations. Manager have to identify the problem of their operations
and make to develop effective solutions for it. In the business economics, there are two
traditional economic theory such as normative where it focus on prescriptive statement and
develop rules to achieve their goals (Business Economics, 2019). On the other hand, another
theory is positive which focus on describing aims in effective manner to the staff so they are
able to accomplish organizational goals & objectives. In order to maximise their production or
profitability, business used to follow demand or supply analysis which mention below:
Law of Demand: According to this law, demand of commodity increases when the price
of product decreases and it will be happen when all the factors are constant rather than price.
There is a inverse relationship between price and quantity demand by the customers (Law of
Demand, 2019). Other factors those are constant will include the disposable income of
customers, price of the substitute, taste & preference of consumers, climate change etc. These
1

factors constant for the shorter period but in long duration they also impact the demand of
product along with price.
Illustration 1: Demand Curve, 2019.
(Source: Demand Curve, 2019)
Above mention graph represent the relationship between price of commodity and the
quantity demand by the consumers (Elgelal and Noermijati, 2015). There is inverse or negative
relationship which clearly shown in the above picture. P is the price of product and Q is the
quantity demanded by individuals. As price of goods increases such as P2 to P1, quantity
decreases from Q2 to Q1. Demand of the product shift from B to A as mention in the graph.
Law of Supply: As per law of supply, there are positive relationship between price or
quantity supplied by the manufacturers. Basically, when product price increases than supply of
product also increases. On the other hand, decrease in the price will also reduce the quantity
which manufactured by the company (Law of Supply, 2019). In this case, only price factor will
effect and other factors are constant and it will be possible in only short term period. Because in
long run, all factors affect the price as well as quantity.
2