House price hike likely
According to The Star, based on a business news it is about “House prise hike likely” that return by David Tan on August 17, 2012. (http://biz.thestar.com.my/news/story.asp?file=/2012/8/17/business/11870222&sec=business) It is about the recent increase in the prices of cement at around 6% by Lafarge Malayan Cement will soon cause an increment of 5%-10% of Penang selling property price as according to housing developers here in Penang. Previously the price for a 50kg bag of cement is priced at RM16.50, after the hike the price of a bag of cement is priced at RM17.50. Lim Kai Seng, the president of Building Materials Dealers Association & Penang Master Builders said that around 60%-80% comprised cement and cement-related materials are used for a building. This is one the reason why the property prices will face a significant impact when the price of the cement increases.
Cost of production increase is one of the main reasons that could affect the price of house. If the cost of production increase but price of housing remaining the same, the profit that earned by the builder will become lesser or some might be transform from profit to loss. So the builder will have to decide on how to increase the profit.
Due to the reason for cost of production it will increase the price of the house, by naturally the power of purchase for people will also decrease means that the quantity demanded will be decrease. Higher price reduce the quantity demanded is the income effect, for example in this case when the price of house rises, the price of house rises relative to income. Their situation is facing the market price for house from a price to a higher price and unchanged income. Reason of having a limitation of asset, the people who plan to purchase a new house will fail. The number of people who choose to rent houses will increase, and the number of houses to rent will decrease. When the product supplied is more than product demanded then the surplus will occur. Surplus is being more than or in excess of what is needed or required.
Every entrepreneur will set their goal to earn the highest profit, no one willing to make a loss business. When the price of the product in the market is high, quantity supplied be also becoming higher so that they could maximize their profit of the product. While the price of the product in the market is low, the quantity supplied will become lesser. In this case, when the houses is selling at a high price, estate agent will try their best to sell it as much as possible so that they could maximize their profit, while the price of the houses is selling at a low price the houses, the unit of the houses that available to purchase will become lesser, they keep the remain unit of houses to sell it off later when the price of the market for houses increase, so they could sell off all of the houses and also get to maximize their profit.
Demand Curve
Demand curve is the distinction between demand and quantity demanded. The term demand refers to the entire relationship between the price of good and the quantity demanded of the good. The term quantity demanded refers to a point on demand curve which the quantity demanded at a particular price. Refer to the graph above is shown about the price and the quantity demanded of houses. For example when the price for a unit of house is at 150,000, the quantity demanded is 2250 units. If the price for a unit of house is 300,000, the quantity demanded is 1500 units. While for the price of 450,000 per unit, 600,000 per unit and 750,000 per unit the respectively quantity demanded is 1000 units, 700 units, and also 500 units. Due to the reason of the unchanged salary but big changes in the price of houses, consumer could not afford to purchase. Reason of the price increase and the quantity demanded is drops, the demand curve will move upward along the curve.
Supply Curve
Supply curve is about the critical distinction between supply and quantity supplied. The term of supply is between the price of the good and the quantity supplied of it. The term quantity supplied refers to a point on a supply curve that the quantity supplied at a particular price. Refer to the graph above is shown about the price and the quantity supplied of houses. For example when the price for a unit of house is at 300,000, the quantity supplied is 600 units. If the price for a unit of house is 450,000, the quantity supplied is 1000 units. While for the price of 600,000 per unit and 750,000 per unit the respectively quantity supplied is 1400 units and also 1500 units. Due to the reason of increasing in the price for cement and other material so the price of the houses will also naturally increase. The curve shifted leftward from S0 to S1. So the price of house will increase 150,000 per ever unit.
Market Equilibrium
Market equilibrium is help to see how the price adjusts to coordinate buying plans and selling plans and achieve equilibrium in the market. As equilibrium is a situation in which opposing forces balance each other. The equilibrium point will occur when the quantity demanded equal to the quantity supplied or in another way means that the intersection point between the demand curve and supply curve. The price below the curve will be a shortage and the price above the curve will be a surplus. It helps to balance the market so that surplus and shortage will not occur. The market equilibrium is the intersection between S1 and D0.
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