Economics Assignment: Analysis of Land Prices in Australia

This economics assignment analyzes the factors contributing to high land prices in Australian cities. The assignment explores the reasons behind the high prices, including the preference for modern housing, the imbalance between investors and sellers, and the impact of transport and infrastructure. The solution includes an explanation of rental costs and a diagram illustrating the relationship between land supply, price, and demand. The assignment also discusses whether the supply of land is perfectly elastic or inelastic in metropolitan cities. The document concludes with a bibliography of relevant articles and books used in the analysis. This assignment is a valuable resource for students studying economics and seeking to understand the dynamics of the housing market and land prices.

ECONOMICS. 1
ECONOMICS ASSIGNMENT.
Name:
Institution:
Date:

ECONOMICS. 2
Economics Assignment.
a. Why land price is high in Australia cities. What are the major drivers of rising house
prices in these cities?
The first reason is that the current clique of generation who are occupying most jobs at
the city prefers houses with modern fittings and current designs. The landlord and other prospect
landlord are fewer in numbers and the tenants are many. The house owners are supposed to serve
a big population of tenants with their few houses this in turn causes a higher demand for houses
and land eventually causing the prices of houses and land to go up, when one tenant vacate the
premise the house owners due to higher demand increases the price for rent, the tenant willing to
occupy the house has no option other than to accept the rent being charged1.
Secondly, the number of investors who are willing to purchase houses and prime land at
the central business district in Australian Cities is very high as compared to the number of the
owners who are willing to sell their houses and land. When these investors buy this prime land
and houses at the inner city they will definitely buy these properties at inflated prices because of
the forces of demand and supply, that is many buyers but fewer sellers2.
Last but not least, is transport and lack of proper infrastructure. Australia is a vast nation,
it ought to have a system of fast and effective trains connecting extensive environs but in its
place citizens are crowd in the innermost city dwelling areas and pays inflated rents in order to
avoid taking hours commuting to work every day. It is only Melbourne that has widespread
railway system Sydney and Darwin just lacks the essentially required trains to sustain the
growing population.
b. Using appropriate diagrams explain the above situations?
1 Forrest, Ray, and Yosuke Hirayama. "Late home ownership and social re-
stratification." Economy and Society 47, no. 2 (2018): 257-279.
2 Kohler, Marion, and Michelle Van Der Merwe. "Long-run trends in housing price
growth." Reserve Bank Bulletin (2015): 21-30.

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The rental cost is the cost which a person incurs in order to use the limited resource for a
restricted time period he pays a fee called rent the fee may be paid monthly or annually
depending on the agreement between the tenant and landlord. From the above graph the
supply of land is constant, the price of land is changing and this causes a shift along the
demand curve which is to the left of the demand curve and this will result to a smaller
quantity of land selling at a higher price3.
3 Mankiw, N.G, Taylor, M.P and Andrew, A. Business Economics, Second edition, Cengage,
Hampshire " 2016.

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c. Is supply of land perfectly elastic or inelastic in metropolitan cities?
A unit elastic kind of demand follows a change in price when purchasers eat almost related
products to meet their wants. In a similar way, a unit elastic supply follows a change in price
when suppliers have almost related goods to produce4. Due to difference in the cost of goods
leads to similar ratio change in the size necessary or quantity given, the elasticity of
demand is equal to negative one and the unit elasticity of supply is equal to positive one.
4 Adelino, Manuel, Antoinette Schoar, and Felipe Severino. "House prices, collateral, and self-
employment." Journal of Financial Economics 117, no. 2 (2015): 288-306.

ECONOMICS. 5
Bibliography
Article and Books.
Gregory, N. Mankiw, Taylor, M.P and Andrew, A. Business Economics, Second edition,
Cengage, Hampshire " 2016
Manuel Adelino, Antoinette Schoar, and Felipe Severino. "House prices, collateral, and self-
employment." Journal of Financial Economics 117, no. 2 (2015)
Marion, Kohler and Michelle Van Der Merwe. "Long-run trends in housing price
growth." Reserve Bank Bulletin (2015)
Ray, Forrest and Yosuke Hirayama. "Late home ownership and social re-
stratification." Economy and Society 47, no. 2 (2018)