Understanding the UK Housing Market: Applying Supply and Demand Analysis

The lecture explores the application of supply and demand principles to the UK housing market. It covers key issues such as mortgage financing, speculative behavior, regional demand variations, and government intervention through social housing. The lecture also discusses the concepts of short and long run supply elasticity, highlighting the volatility of housing prices. The impact of interest rates on housing demand and the phenomenon of negative equity during the credit crunch are examined. The lecture concludes with a comparison of housing market dynamics in different UK regions.

What is the first step in analyzing supply and demand diagrams?

• Assessing time frames

• Comparing new and old equilibrium

• Determining the initial equilibrium

• Identifying the cause of shifts

How does a decrease in interest rates affect housing demand?

• Shifts demand inwards

• Shifts demand outwards

• Decreases housing prices

• No effect on demand

What is negative equity?

• When an asset's value exceeds its purchase price

• When an asset's value is less than its purchase price

• When an asset's value remains constant

• When an asset's value is unpredictable

What behavior leads to increased housing prices due to speculation?

• Market saturation

• Price stabilization

• Herding behavior

• Cautious investing

What causes regional demand variations in the UK housing market?

• Stable population growth

• Uniform job prospects

• Immobility of housing and labor mobility

• Consistent housing supply

How does the government increase housing supply?

• By reducing taxes

• By building social housing

• By increasing interest rates

• By limiting immigration

What is the nature of housing supply in the short run?

• Constant

• Elastic

• Variable

• Inelastic

How does long-run supply elasticity affect housing?

• Stabilizes demand

• Has no effect on prices

• Increases price volatility

• Decreases price volatility

What is the impact of social housing on supply?

• Decreases housing demand

• No change in supply

• Shifts supply outwards

• Shifts supply inwards

What is a key issue with social housing?

• Low quality

• High cost

• High quality

• Limited availability