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Help on these AS-Level Edexcel Economics Questions. Watch

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    6.)What will be the impact on UK house prices of the following? Refer to the relevant change in demand or supply in your answer.
    a) A fall in UK employment (2 marks)
    b) An increase in the cost of building materials, such as bricks (2 marks)

    Can someone please help me on these questions? I would really appreciate it!
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    (Original post by dp00)
    6.)What will be the impact on UK house prices of the following? Refer to the relevant change in demand or supply in your answer.
    a) A fall in UK employment (2 marks)
    b) An increase in the cost of building materials, such as bricks (2 marks)

    Can someone please help me on these questions? I would really appreciate it!
    a) Well a fall in UK employment will almost certainly coincide with a fall in average incomes. If you imagine an AD/AS graph with either AD or AS decreasing, this would lead to a fall in real income and so, ceteris paribus, average incomes will fall. If average incomes fall, what do you think will happen to the demand for housing? Once you can figure that out, it shouldn't be to difficult for you to find out what will happen to the price of UK housing, assuming you understand demand and supply diagrams.
    b) If the cost of building materials increases, this means that the cost of production for houses will increase. Do you know what happens to supply curves when costs of production increase? If so, what do you think will happen to the supply for housing, considering the fact that the cost of production of housing have gone up? Once you can figure this out, the impact on prices shouldn't be too difficult to figure out.

    If you need more guidance, feel free to ask
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    (Original post by dp00)
    6.)What will be the impact on UK house prices of the following? Refer to the relevant change in demand or supply in your answer.
    a) A fall in UK employment (2 marks)

    Due to a fall in employment, the demand for housing may fall as overall incomes have decreased, therefore the house prices will fall. Illustrate this with a supply and demand curve with demand curve shifting left and this should show a decrease in quantity demanded and decrease in price.

    b) An increase in the cost of building materials, such as bricks (2 marks)

    As the cost of production has risen (make sure to use this phrase as it is a key phrase I guess you can say), this will mean supply will fall (you can say it is less profitable or less incentive for firms to build houses), therefore supply curve should shift left, leading to an increase in price and a reduction in quantity supplied.

    Can someone please help me on these questions? I would really appreciate it!
    Hope this helps!
 
 
 
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