Analysis of the Construction Industry in Economics and Trade

This report provides a comprehensive analysis of the construction industry, focusing on its contribution to the Australian economy. It delves into the market structure, specifically examining the characteristics of perfect competition within the industry and identifying key market leaders. The report also explores the determinants of demand and supply, including factors like buyer income, consumer preferences, input prices, and government policies. Furthermore, it analyzes the elasticity of demand for construction services and discusses an event, 'Improved Safety Policies and Procedures,' that has significantly impacted the industry. The report concludes by summarizing the key findings and emphasizing the interplay of economic principles within the construction sector, offering insights into how market forces, government regulations, and safety measures influence the industry's performance and growth. It references key statistics such as the contribution to GDP, employment figures, and population growth to support its claims.

Economics and
International Trade

Table of Contents
INTRODUCTION...........................................................................................................................3
1. Overview of Construction Industry.........................................................................................3
2. Analysis of market structure in the construction industry......................................................4
3. Determinants of demand and supply influencing the construction industry...........................6
4. Elasticity of demand for construction industry.......................................................................7
5. Analysis of event that has impacted the construction industry...............................................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................11

INTRODUCTION
Economics and international trade is being done through the exchange of goods and
services in between the countries as this trade will make the economy more strong in which
price, supply and demand are affected by the global events. This report contains the overview of
the Business Solutions Inc. that deals in the premier information system in consultancy company.
This report elaborates the statistics of revenue, employment and the contribution of the company
in the national GDP and growth rate. This report also analyse the market report market structure
of the company in which the market structure is being shown.
1. Overview of Construction Industry
The construction industry of Australia is the largest growing industry sector in country.
The rapid growth of the industry will continue to contribute a large share of GDP and will
provide more employment to people and contribute to the development of prosperous economy
of Australia. The construction industry in Australia has an influential effect on population
growth, labour, technology and housing. Key statistics of the construction industry in Australia
are stated as :

 The construction industry in Australia is a large employer as it employs around 1.1
million people of Australia in different roles in the industry. This figure is bound to
increase as the industry is expanding in regard to technology, financial sectors and
services.
 The construction industry of Australia contributes around 8% to the GDP (gross domestic
product) of the nation. This sector is largest in non service industry by contributing 134.2
billion dollars to the Australia's economy. The investment can increase in construction
industry in reference to its size and value.
 Australia has experiences a speedy growth of population with a yearly growth rate of
1.6%. The rise in population will cause a rise in demand of new construction structures of
both commercial and residential space.
 The total construction work in Australia is rising by 2 percent in each quarter. This proofs
that the potential of construction industry is rising day by day. The growth rate will serve
as a fuel to greater effective and efficient commercial and residential structures in
Australia. The commercial construction work tends to rise by 9.3 percent due to increase
in population in urban areas of the country. The construction involves road, rail,
telecommunications and civil projects.
 The employment in Australia's industry experiences a growth rate of 3 percent. This will
expand the growth of economy of country.
 The government of Australia, confirms the expenditure of 75 billion Australian dollars in
ten year national infrastructure plans in May 2018 which will focus on the improvement
of road safety and tackling congestion (Nadhim and et.al. , 2016).
2. Analysis of market structure in the construction industry
The market structure describes the composition of different sizes of firm and how these
firms are diversified into sub sectors. The type of market structure in construction industry is
Perfect Competition. Perfect Competition structure involves many firms each selling identical
products and there is no restriction on entry of new entrants in the industry. The firms in the
industry have no advantage over the entry of new firms. The suppliers and buyers are both well
informed about the price of the products and services of each and every player in the industry.

The firms in the industry cannot influence the price of the product or service and they are the
price takers. The players sell products with the aim to maximise economic profit. The total cost
of the firm is only the opportunity cost which includes normal profit. Business Solutions Inc. is a
part of perfect competition market structure in the industry (Nadhim and et.al. , 2016.).
Illustration 1 : perfect competition
(Source: The Four Types of Market Structures, 2019)
Market Leaders in the industry
The market leaders of the construction industry in Australia who gives a tough competition to
Business Solution Inc. are as stated :
BCG (Buckeridge Group of Companies) was set up in 1994 and has been working on
projects in the whole of Australia. Its is meeting the demands for construction of commercial
building in Western Australia.
ADCO Constructions delivers projects across Australia and has till date completed over
3500 projects valuing 10 billion dollar. It has listed under top 50 companies of Australia.
Fulton Hogan has been working in the construction industry for around more than 80
years and works in different sectors including water, civil, land development, mining and energy.
John Holland is involved in projects working in every state and territory of Australia. It
was founded in 1948.

ProBuild was found in 1987 and has a employee composition of over 1300 employees. It
is working on the Sydney's tallest residential tower which includes 497 apartments of 67 storeys.
Hutchinson Builders is the largest privately owned Australian company settled in 1912. It
has a workforce of 1500 people and works on 250 projects every year on average basis.
3. Determinants of demand and supply influencing the construction industry
Determinants of demand influencing the construction industry
(1) Income of Buyers : The income of buyers effect the growth of construction industry. A
buyer is in a condition to involve in construction activities only if it has a sound level of
income and appropriate resources to invest in it. A raise in income will raise the demand
of construction business whereas a fall in income of buyers will hence decrease the
demand of construction business.
(2) Taste and preferences of consumers : The taste and preferences play a major role in
influencing the demand of constructions of business. The taste and preferences of
consumers are affected by different factors such as lifestyle, age, sex, standard of living,
change in fashion, etc. A frequent change in taste and preferences of buyers will increase
the demand in construction business whereas no change in taste and preferences of
buyers will decrease the demand of construction business.
Determinants of supply influencing the construction industry
(1) Price of Inputs : The price of inputs is a significant determinant in effecting the supply of
construction industry. If the price of direct labour rises, the production cost of company
such as wages increase the overall cost. Increase in cost will decline the profit.
Construction industry's profit is directly dependent on the cost of raw materials, labour
costs and direct expenses. Therefore, a little change I these costs will affect the
profitability of the construction industry.
(2) Government Policy : Government policies play an important role in any industry. The
government by imposing taxes affect the supply of any commodity used in the
construction business. The government can ask companies to pay different taxes such as
environmental taxes which increases the costs of firms and thus leading to reduced
supplies. Similarly, government can provide subsidies to firms to increase their supplies

to meet the existing demands. Government can use licensing tools to implement control
on supply of firms (RoutKnittel and Pindyck, 2016).
4. Elasticity of demand for construction industry
Elasticity of demand refers to the changes in quantity demanded for a product or a service
in response to the change in economic variables such as price of goods or consumer income. A
higher elasticity of demand reflects that consumers are more prone to changes in variable. There
are 5 types of price elasticities which can be stated as :
Illustration 2: Types OF Elasticity
(Source : 5 Types of Price Elasticity of Demand, 2019)
In perfectly elastic demand, a small change in price of a product or service causes a
significant change in quantity demanded of goods or services. A major rise in price can cause the
quantity demanded to zero whereas a major fall in price can cause the quantity demanded to
infinity.
In perfectly inelastic demand, there is no change in the quantity demanded with a change
in price.
In relatively elastic demand, the proportion of change in quantity demanded of product or
service is greater than the proportionate change in price of the service or product.
In relatively inelastic demand, the proportion of change in quantity demanded of product
or service is lesser than the proportionate change in price of the service or product.
In unitary elastic demand, the proportion of change in quantity demanded of product or
service is same that of the proportionate change in price of the service or product.

Business Solution Inc. has an elastic demand because a small change in price causes a
major change in the services demanded by buyers. It is elastic because a sudden rise in price by
the company may shift its client to any other construction company and make its services
demanded to nil whereas a small decline in price by the company may shift the competitors
clients to Business Solutions Inc. and make its services demanded to reach infinity. The dramatic
responsiveness of services demanded in regard to the change in price is referred as elasticity and
this makes the company services elastic (Shergold and Weir, 2018).
5. Analysis of event that has impacted the construction industry
The event which has impacted the construction industry is “Improved Safety Policies and
Procedures”. Construction job is not considered a safe job in the economy especially when it is
compared with office job. This is considered as a dangerous job because of the accidents and
fatalities caused during business. This has resulted in a greater level of scrutiny on the whole
construction industry. This scrutiny has resulted in the development of technology designed to
make construction sites safer and less prone to accidents. An improvement in safety policies
have made it easier for the workers in the construction industry as these new safety policies bind
the company to adhere to the safety measurements when employees are working. There has been
a significant regulation to use better safety equipments. Better safety equipments will reduce the
number of death of workers on site. There are devices known as work boots that can be
connected to Wi-Fi and function to send their GPS coordinates and also aid in telling if users
have fallen or feel fatigue. While smart boots are difficult to get in market now, but sooner the
products like them will eventually be a common place item on the construction job site. The
technology that is used in moisture - wicking fabric and cooling vests are also more effective
now. And with the help of drones and other product safety surveying equipment, it is now easier
to see other issue areas of a construction job site. This all safety measures will keep the
employees more safe and reduce accidents on construction sites (Brim, 2017).

Illustration 3 : Market Demand/Supply of industry
(Source : Regulation & the Economy, 2017 )
The implementation of improved safety policy and procedure event on construction
industry has overall affected the cost of the company and tend to decrease the profit potential of
construction industry. This has raised the price of construction activities for buyers and hence
there is a decrease in demand for construction business. Though, the implementation of safety
measures in the construction industry has attracted people to pursue their career in construction
industry and hence the supply of labour is abundant and greater. This abundance of labour supply
has resulted in availability of cheap labours and tend to decrease the overall labour costs. This
improved safety measures will improve the quantity and quality of construction work and will
raise the market price for construction business (Becker, 2017).
CONCLUSION
From the above study it has been concluded that this report how construction industry
contributes in the Australian economy. It has also evaluated that how market structure affects the
business of a concern and how determinants of demand and determinants of supply influences

construction industry. It is further evaluated elasticity of demand affects the revenue of the
company.

REFERENCES
Books and Journals
Becker, G. S., 2017. Economic theory.
Brim, O., 2017. The economic theory of representative government.
Nadhim, E. and et.al. , 2016. Falls from height in the construction industry: a critical review
of the scientific literature. International journal of environmental research and public
health.13(7). p.638.
RoutKnittel, C. R. and Pindyck, R. S., 2016. The simple economics of commodity price
speculation. American Economic Journal: Macroeconomics. 8(2). pp.85-110.ledge.
Shergold, P. and Weir, B., 2018. Building confidence: improving the effectiveness of
compliance and enforcement systems for the building and construction industry across
Australia.
Online
5 Types of Price Elasticity of Demand. 2019. [Online]. Available through
<http://www.economicsdiscussion.net/elasticity-of-demand/5-types-of-price-elasticity-of-
demand-explained/3509>
Regulation & the Economy. 2017. [Online]. Available through
<https://www.ced.org/reports/regulation-and-the-economy>
The Four Types of Market Structures. 2019. [Online]. Available through
<https://quickonomics.com/market-structures/>