Econs Market Structure

Topics: Supply and demand, Price point Pages: 2 (895 words) Published: November 1, 2014

“In the first quarter of 2010, the market for private homes in Singapore saw a record breaking prices and transaction volumes, prompting calls for government intervention to cool the market.” Using economic analysis, explain the reasons for the “record breaking prices and transaction volumes” for private homes in Singapore. Private homes in Singapore seeing a record breaking prices and transaction volumes is due to the actions of both the consumers and the producers, which will cause a shift in the demand and supply and hence there will be an impact on the output and price. Demand refers to the different quantities of a product consumers are willing and able to buy at each possible price during a given period of time, ceteris paribus. While supply refers to the various quantities of a good a producer is willing and able to offer for sale at a given set of prices over a period of time in a given market, ceteris paribus. Shifts in both demand and supply occur due to a chance in the non-price determinants that affect both. The reason for private homes seeing a record breaking prices and transaction volumes are due to this change in the non-price determinants which affect demand and supply. This essay seeks to explain how these changes impact the output and price of private homes in Singapore. An increase in output and supply is due to an increase in demand. This is because when there is an increase in demand, producers are pressured to increase output in order to cope with the increase in demand to regain market equilibrium. An increase in output is only possible if the price increases as well. This is illustrated in the graph below, where when the demand curve shifts from D1 to D2, the price as well as the quantity increases. A factor that can cause this increase in demand is the increase in income among Singaporeans. The reason for an increase in demand for private homes could be due to the fact that there is a growing affluence among Singaporeans, and hence...
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