Mcmansion Pty Ltd Is A Housing Construction Business That

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McMansion Pty Ltd is a housing construction business that competes with a lot of other construction firms in the State of Victoria. Part A: In the past few years Victoria, has seen acute fluctuations in the demand and supply of houses. There are three major elements that effect the demand of housing: Higher income: As the standard of living rises, the purchasing power for housing expands, so so people spend more on buying a private property, leading to an increase in the demand of houses leads to a right shift in the demand curve. Population growth: Not very long ago, Victoria has experienced an increase in population growth due to overseas migration and birth rate; leading to a higher demand for houses and this result also leads…show more content…
Which leads to a right shift in the curve. Expected Future Prices: According to the Real Estate Institute of Victoria, house prices continued to rise in most of Victorian regional centres due to increasing population growth and consumer confidence. This leads to the conclusion that the supply of the construction firms increases today as growth is increasing, but decreases are predicted in the future which leaves in conclusion, the supply curve shifts to the left. Price elasticity of demand: Price elasticity of demand refers to the responsiveness of quantity demanded to changes in price. In a nut shell, the demand for housing is inelastic, as living standards rise, people tend to purchase more private property even if the price for housing is increasing gradually. There has been an increase in quantity demanded for housing due to overseas immigration and high birth rate. The housing prices are rising but people need a house to live in. The demand curve moves to the right maximum. Part B Minimum wage rate is and important issue due to the rising inflation in Australia. The distribution of income is leading to a gap between the rich and the poor. As the minimum wage rate rises, the fixed costs of construction is rising hence the Cost of production is rising. This will effect the supply curve by shifting left because the demand for house will fall due to high prices. In conclusion prices have negative relations
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