Analysis of UK Housing Market: Demand and Supply Concepts

Running head: ANALYSIS ARTICLE
Analysis article
Name of the student
Name of the university
Author Note

1ANALYSIS ARTICLE
Table of Contents
Introduction:............................................................................................................................ 2
Summary of article:..............................................................................................................2
Essay of overview:................................................................................................................2
Analysis:................................................................................................................................... 2
Demand and Supply concepts:.............................................................................................2
Demand elasticity for houses:..............................................................................................4
Consumer surplus and producer surplus:.............................................................................5
Conclusion:............................................................................................................................... 6
References:.............................................................................................................................. 7

2ANALYSIS ARTICLE
Introduction:
Summary of article:
Larry Elloit has written an article in the Guardian on 12th April 2018 about housing
market of the United Kingdom. According to this article, the demand for houses in this
country has decreased surprisingly in recent year. Based on a survey report on lenders of
the Bank of England, demand for housing loans has fallen by 29% (Elliott 2018).
Consequently, this decreasing demand may lead the housing price to decrease further or
may remain stable in some parts of the country. In London, this housing price has decreased
by 4% on the quarterly basis, that is, for the first three months of the present year.
However, this changing price of houses may not lead any natural disaster rather it may
bring country’s economic condition in a better poition. In this context, it can be mentioned
that increasing demand and shortage of houses has helped the market prices to remain at a
higher level.
Essay of overview:
This essay has intended to focus on this housing market with the help of demand
and supply concept of the microeconomics. In addition to this, the essay has also tried to
analyse the demand elasticity concepts along with consumer and producer surplus.
Analysis:
Demand and Supply concepts:
The law of demand can be considered as one of the basic concept of
microeconomics. According to this, price is the chief factor that influences demand for a
product to fluctuate. Based on this fundamental concept, it can be said that the price and
quantity demanded for an inferior, normal or luxury product has a negative relationship,
which means, increase in price has led the quantity demanded to a negative direction
(Marwala and Hurwitz 2018). In this context, the concept of utility is also very essential to
understand. People demand a product from which they get utility through consumption
(Keller 2015). Moreover, willingness to pay for this product can be mentioned as well. In
economics, the concept of demand for a product occurs when consumers show their
willingness to pay for the one. To describe the law of demand, some factors, which can also
influence the demand for this product, remain constant. Those factors are tastes and
preference of consumers for this particular product along with their income, geographical
location, time and prices of related commodities as well (Tadasse et al. 2016). If any external
factor has changed, the demand curve has also changed accordingly. For instance, increase
in consumer income can help the demand of the product to increase further at the given
price level. Consequently, the curve has shifted to the right. The opposite situation can also
occur if the income of consumer decreases. The situation is also true for consumer’s tastes
and preference and for the price of relative commodity, where at same price level demand
curve may shift to the right or left according to the change of those external factors. The
demand curve for houses has possessed a negative slope to represent inverse relation
between housing prices and corresponding amount of quantity demanded. On the other
side, supply curve has sloped upward to represent a positive relation between prices of
houses and quantity supplied in market (Kolmar 2017). Hence, the amount of equilibrium
price can be determined with the help of demand and supply curve. The following diagram
has represented this situation.