Question

Article 1

Hong Kong public housing: increased land supply and reduced demand to cause drop in shortfall, but government still lagging behind targets (SCMP, 18 Dec 2019)1
Hong Kong’s public housing shortfall is expected to ease in the next 10 years because of increased land availability and reduced demand, but the government is still expected to miss its supply target. Secretary for Transport and Housing Frank Chan Fan, who is in charge of reviewing and updating a rolling 10-year housing strategy annually, admitted the long wait for public housing would probably not improve soon as “demand pressure for flats remains very high”. “The queue for public housing with more than 250,000 applicants may increase in the future, and there is still a shortfall in supply,” he said on Wednesday....... As for public flats, supply is still expected to fall behind the government’s new target because of limited available land.......... Given the smaller demand and additional supply, the shortfall would be narrowed down to about 29,000 flats in the coming decade, compared to 67,000 last year....... The Lantau reclamation project, which was mentioned in last year’s report as one of the long-term measures for land supply, was omitted from this year’s report........ Demand for public sector homes has always been keen in the city. Families for public rental housing face an average waiting time of five years and four months for a subsidized flat.

Question 1: over 100

With reference to Article 1, given that the supply of housing is perfectly inelastic, with the aid of diagram(s), illustrate the following situation in Hong Kong public housing market: “Given the smaller demand and additional supply, the shortfall would be narrowed down”.

Answer 1

Perfectly inelastic demand is the situation where there no change in quantity demanded even there is change in price of the goods, the the demand is said to be perfectly inelastic. Simply mean no change in demand for change in price.

A PED coefficient equal to zero indicates perfectly inelastic demand. This means that demand for a good does not change in response to price.

Perfectly inelastic products would be something like air or water, and no one can really restrict that at this point in time. The most common products that are inelastic would be food, prescription drugs, and tobacco products. Another product that could be considered close to perfectly inelastic would be gas.

In a perfectly inelastic demand or supply, a change in price leaves the quantity demanded or supplied unaffected. ... This type of demand occurs when consumers have no substitute goods to meet their needs; a perfectly inelastic supply occurs when supplies have no substitute goods to produce.