Question

Five housing policies are described below, based on examples of measures that have been introduced or proposed in the UK, in response to a chronic shortage of affordable houses in many regions.

Drawing on the module material, write an essay that explains, using the ‘demand-and-supply’ model, the likely impact of each policy on the equilibrium quantity and price of houses, and how this might affect the UK’s affordable housing shortage.

Policy 4

The government has introduced a three-per-cent stamp duty surcharge that property owners are liable to. Some observers have said that this would push amateur buy-to-let landlords out of the market, as they are less well resourced to cope with the tax change compared to corporate developers. Most of the landlords who might be pushed out of the letting market by this measure are wealthy parents investing for their children’s future or those who have inherited properties.

Answer 1

Demand and Supply model:

It is an economic model to detemine the price in the market. It tells about the relationship between the quantity of a commodity that producers wish to sell at various prices and quantity that consumers wish to buy. The price of the commodity is determined by the interactions of supply and demand in a market. And the resulting price is called as the equilibrium price and represents the agreement between producers and consumers of the good.

Equilibrium: Quantity of goods supplied = Quantity demanded by consumers.

The law of demand:  At higher prices, buyers will demand less of an economic good.

The law of supply: At higher prices. sellers will supply more of an economic good.

As explained in the example, the landlords are trying to buy at lower prices and  government has levied the stamp duty surcharge tax for buying any property in the UK.

The four basic laws of demand and supply:

* If demand increases and supply remains unchanged, then it leads to higher equilibrium price and higher quantity.

* If demans decreases and supply remains unchanged, then it leads to lower equilibrium price and lower quantity.

* If supply increases and demand remains unchanged, then it leads to lower equilibrium price and highe equilibrium.

* If supply decreases and demand remains unchanged, then it leads to higher equilibrium price and lower quantity.

So, higher the demand and higher the supply tells about the relativity in between them.