16633 Chapter Notes - Chapter 10: Market Failure, Effective Demand, Externality
Document Summary
Economics for today housing markets & policy issues chapter 10. The affordability crisis: declining housing affordability has been attributed to many factors: House prices rising due to rapid population growth leading to housing demand outstripping supply. Increases in the cost of developing new homes. Solutions to the affordability problem: first home owners" grant. A subsidy in the form of a lump sum payment made by government to purchasers of their first home. In discussing how governments might best endeavour to make housing more affordable, it is variations in supply elasticity that shed most light on the issue: let us look at two different assumptions about the elasticity of supply: Effect of first home owners" grant: high elasticity of supply implies housing stock can be expanded with little upward pressure on house prices, but studies have shown that australian housing market has low elasticity (i. e. inelastic): In the major cities the land best suited for housing has already been developed.
