Home Building Industry

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Home Building Industry

Price elasticity of demand and supply
Home building industry in today's world has been evolved as a large market for the individuals who are looking for as well as for those persons who are searching for a safe place for their families. There are several factors that directly affect the home building market. These factors include increase or decrease in the average income, decreased annual spending along with the changes in the mortgage interest rates. The national economy of a country is affected by the home building in a number of ways and among those reasons the most evident is by employing the workers who actually form the structure. As the new home buyers usually purchase the items such as furniture and appliances, the home building provides a further spending that stimulates the economy.
The price elasticity of demand in terms of economics can be defined as the responsiveness of the demand to change in price of the commodity. In other words, it can be defined as the proportionate change in the quantity demanded of a commodity relative to the change in its price. When the demand of a commodity does not change much due to the changes in the price, in such a case the demand of that good is inelastic. In general terms, it can be said that the necessary goods have inelastic demand (Siddiqui, 2002).
The price elasticity of demand of the home building industry is inelastic due to the reason that the changes in the price of the home building does not lead to much changes in the demand of the good. As building home is a necessary good or considered as essential commodity for the consumers, the increase or decrease in the price of such goods does not much affect its relative demand in the market. Also, in terms of economics, the price elasticity of demand states that when a considerable change in the price of a commodity does not lead to much change in its demand, the demand for such goods is said to less elastic or inelastic. Another reason for the inelastic demand of the home building industry is that there is no substitute available for building homes in the market and the goods that have no or less substitutes have inelastic demand (Mathur, 2003).
The price elasticity of supply of the home building industry is also inelastic due to the reason that the changes in the price of the home building only slightly affect the supply of these goods. Thus, both the price elasticity of demand and supply of the home building industry is inelastic because of the reason that the demand and supply of this industry (home building) is highly affected by the perceptions of the consumers and in today's world, the interest of the consumers is high towards finding modern homes, which are more energy efficient, equipped with innovative technologies (such as personal gyms and spas), designed with better architectural features and modern amenities, do not contain lead and asbestos and are affordable more easily. Due to all such reasons both the supply and demand of home building is high in the market and there change in the price will not much affect its demand as well as supply (Siddiqui, 2002).
Positive and Negative Externalities
In economic terms, externalities can be defined as an impact that positively or negatively affects a company or industry. It does not ...