Question

PRIVATE HOME OWNERSHIP IN CHINA

Private home ownership is increasing in China. For years the urban Chinese relied on overcrowded housing rented from the state and often waited a long time to have their own apartment. Now, with the increase in the market economy, the government is encouraging city-dwellers to buy their own homes by giving cheap loans and tax-relief. Home buying will help China’s economy. New home-owners need to spend money on furniture, appliances and decorating. GDP grew by 8% in 1999, of which the housing industry contributed about a fifth.

The housing changes will affect social and political issues as well as the economy. In the old system people had to live close to their work, and it was difficult to change jobs because no other housing was available. Single people had no hope of being allocated an apartment. Now anyone with money can buy a home and choose where they wish to live.

a) Explain what is meant by the market economy.

b) Explain the meaning of complements and substitutes, giving an example of each from the passage.                                                                                             

c) Identify four factors that might influence a worker’s choice of occupation.

d) How far do you think the change in the provision of housing is likely to affect a worker’s choice of occupation?                                                                       

e) Discuss whether the change in the provision of housing is likely to benefit everybody.     

Answer 1

a) Market economy is basically characterised by demand and supply wherein decisions regarding investments, production and distribution are carried out by the demand and supply scenarios in an economy. Higher the demand higher the supply.  

b) Complements are goods which add value to each other. For example increase in home ownership leads to increase in demand for furniture, appliances and decoration.

Subsitutes on the other hand have the same characteristics such as beverages and cars. Wherein having more of one more beverage, leads to decline in demand for another beverage such as tea and coffee. Subsitute for new home ownership is taking a place on rent.

c) Four factors which might influence a worker's choice of occupation are the closeness of the house to a workplace, reducing the time to travel, affordability of the place on rent or new house. Salary for the occupation and satisfaction gained will also influence a worker's choice of occupation.

d) Change in the provision of housing will affect the worker's choice of occupation to a great extent as previously workers used to take places on rent which were closer to their workplace and it proved difficult to change jobs as alternatives were not available. Now on the other hand, with private ownership, people can settle down and work in remote areas where there is large scope for being self employed as overheads are low, and with higher economic output more opportunities are generated which makes them seek jobs wherein they are expected to benefit the most and own homes close to those jobs.

e) The change in the provision of housing is not likely to benefit everybody as firms who used to give overcrowded housing options will find it increasingly difficult to seek employees. The rent seekers will also find it difficult to seek new tenants as more people will have private homes.