Question

Briefly define and give a specific example of:

A.1.Housing tenure

A.2.Stock-flow housing model

A.3.Pure private good

A.4.Pure public good

A.5.The impure (crowded) public good

A.6.Capitalization of an amenity into house value

A.7.The optimization rule for a public good

Answer 1

1)Housing tenure refers to the financial contract to occupy the whole house or a part of the house.For eg a member of the household may own a housing unit or rent all or part of the housing unit.

2)Stock-flow housing model-Durable goods like houses are estimated with stock flow model. The housing stock which is fixed in the short run and the flow of residential investment are linked together through housing prices .The level of housing stock fixes the housing prices and this in turn influences the flow of residential investment. Eg the stock flow model has been used to estimate the Swiss housing market.

3)Pure private goods have the property of getting excluded by producers as well as the property of rivalry. The producers can convince some consumers from not consuming certain goods and services depending on their capacity to pay as well as willingness to pay.Pure good has the property of rivalry because when one person consumes a good ,very less is left for others to consume. Personal computer is an example.

4) Pure public good are those which are available to all public .It can be used by all individuals without excluding anyone and when it is used by one person it does not mean that another person cannot use it.Eg poblic park.

5)Impure public good has the features of a public good in that all individuals can use it but it is possible to exclude consumers from using it at certain times.It is possible to exclude people who have not paid for it from using it.Eg A club

6)This means the amenities available near the house affect housing prices. For eg the nearness of a school from the house will raise the price of house.

7)The optimal quantity of public good depends on the demand for pubic good.The supply of public goods depends on marginal cost.The marginal cost will increase when more quantity of public goods are produced.