Economics: Supply and Demand Basics

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

What happens to house prices when there is an oversupply of properties and low demand?

House prices fluctuate wildly.

House prices tend to rise.

House prices remain stable.

House prices tend to fall. (correct)

How does rising income typically affect the demand for housing?

It leads to decreased demand for luxury housing.

It reduces the number of affordable housing projects.

It has no significant effect.

It increases demand for housing. (correct)

What is the estimated housing shortfall in the country mentioned for 2016?

4.1 million units.

7.5 million units.

5.8 million units. (correct)

3.2 million units.

What is a primary reason private developers are hesitant to engage in affordable housing projects?

Lower commercial returns on investment. Signup and view all the answers

What percentage of their total project cost must developers allocate to socialized housing in urban schemes?

20% Signup and view all the answers

What factor greatly influences demand for houses according to consumer behavior?

Consumer confidence. Signup and view all the answers

Which of the following is true about affordable housing production?

It is less than 200,000 units produced annually. Signup and view all the answers

What benefits do developers receive for participating in socialized housing?

Value-added tax exemptions. Signup and view all the answers

What happens to the price of a good when there is high demand for it?

The price rises Signup and view all the answers

What is the equilibrium price in the context of supply and demand?

The price where supply equals demand Signup and view all the answers

When will a bidding war typically occur in the housing market?

When multiple buyers want the same property Signup and view all the answers

According to the law of supply, what happens to the quantity supplied when prices rise?

Quantity supplied increases Signup and view all the answers

What effect does a low supply of housing inventory have on prices?

Prices may rise Signup and view all the answers

What percentage of residential units under PD 957 is allocated for high-end housing?

30% Signup and view all the answers

Which of the following statements is true regarding the law of demand?

Demand decreases as prices increase Signup and view all the answers

What is the role of supply elasticity in housing markets?

It affects the construction of new housing. Signup and view all the answers

According to the recent research findings, what is increasing the need to understand housing-market fundamentals?

Extraordinary nature of the recent boom. Signup and view all the answers

How do unsold items affect the price when there is an oversupply?

Prices fall Signup and view all the answers

What is likely to happen when there is a combination of high demand and low supply of houses?

Prices are likely to rise Signup and view all the answers

What is the allocation percentage for mid-end housing under PD 957?

40% Signup and view all the answers

What type of housing do fresh graduates typically transition to after saving from living at home?

Studio or one-bedroom condominiums Signup and view all the answers

What time period was used to base the assumption of residential unit registration?

2003 to 2010 Signup and view all the answers

What percentage of remittances is estimated to go toward supporting family members in housing?

60% Signup and view all the answers

What is a consequence of rising rents on household behavior?

Households will seek to buy a house as buying becomes relatively cheaper. Signup and view all the answers

What is the estimated average number of housing units that need to be produced annually in the Philippines until 2030?

305,412 units Signup and view all the answers

Which factor is essential for understanding the growing price dispersion across metropolitan areas?

Local land use regulations Signup and view all the answers

What is the calculation used to assess the undervaluation or overvaluation of real estate prices?

Price/rent ratio calculated from gross rental yield Signup and view all the answers

The term 'income-elastic' in relation to housing demand suggests what about consumer behavior?

Demand increases rapidly with rising incomes. Signup and view all the answers

What demographic typically opts for subdivisions or townhouses outside Manila’s primary commercial districts?

Young families Signup and view all the answers

What is a likely consequence of rising prices on demand?

Demand will rise as people seek to gain from rising wealth. Signup and view all the answers

Which demographic change is contributing to an increased demand for housing?

Increased life expectancy leading to more single older people. Signup and view all the answers

How do interest rates affect mortgage repayments?

Higher interest rates increase monthly repayment amounts. Signup and view all the answers

What has been a significant effect of the Credit crisis of 2008 on mortgage lending?

Higher costs in interbank lending and reduced mortgage availability. Signup and view all the answers

What is the impact of increased purchasing power on retail space demand?

It boosts demand as retailers seek expansion. Signup and view all the answers

What is a key factor influencing the effective demand for houses?

The willingness of banks to lend mortgages. Signup and view all the answers

Which of the following trends is observed in the domestic housing market?

A surge of first-time buyers due to low mortgage rates. Signup and view all the answers

What social factor is contributing to the rise in household numbers?

Higher divorce rates leading to single-parent families. Signup and view all the answers

Study Notes

Supply and Demand Basics

The law of supply and demand impacts the price of goods and services
High demand leads to higher prices, conversely low demand leads to lower prices
Equilibrium price is reached when supply equals demand
Demand decreases as price increases and vice-versa
Supply increases as price increases and vice-versa

Factors Affecting Demand in Housing

Affordability: Rising incomes drive demand as people can afford more expensive housing, a rise in income can result in house prices rising faster than earnings
Confidence: Consumer confidence in the economy and housing market influences demand, rising prices can generate demand as people seek to gain from increased wealth
Interest Rates: Impacts mortgage costs, lower interest rates can drive demand
Population: Increased population and changes in household size (e.g., single-person households) can influence housing demand
Mortgage Availability: Increased availability of mortgages with greater income multiples leads to higher demand, however, limited mortgage availability can constrain demand
Economic Growth and Real Incomes: Rising incomes enable people to afford larger mortgages, promoting demand for housing
Cost of Renting: If rental costs rise, demand for housing can increase as buying becomes relatively cheaper

Factors Affecting Supply in Housing

Total Stock of Units: The total number of available housing units within a region is a key factor affecting supply
Local Land Use Regulations: These regulations can influence the availability of land for development and thus influence supply
Heterogeneity in Supply Conditions: Differences in housing supply elasticity across markets can impact price dispersion and growth patterns
Market Segmentation of Residential Construction: Analysis of residential construction statistics can provide insights into supply trends within different market segments (low-cost, mid-end, high-end)
License to Sell Statistics: Tracking the number of registered residential units can provide insights into supply trends

Key Data

Affordable Housing Shortfall: Estimated to reach 5.8 million units in 2016
Affordable Housing Production: Industry produces less than 200,000 units annually, failing to meet demand
Philippines Housing Demand (2016-2030): Estimated to be approximately 305,412 units per year

Additional Notes

Philippines Housing Market: Experiencing a surge in first-time buyers due to low mortgage rates and a growing middle class
The Impact of OFWs: Remittances from overseas Filipino workers contribute significantly to the housing market, with a substantial portion going towards family housing purchases

Studying That Suits You

Use AI to generate personalized quizzes and flashcards to suit your learning preferences.

Description

This quiz explores the fundamental concepts of supply and demand, highlighting how they influence the prices of goods and services. It delves into various factors specifically affecting demand in the housing market, including affordability, consumer confidence, interest rates, and population dynamics.