SUSS ECO201e Managerial Economics | Consider the property market in Singapore which are affected by the following incidents, Singapore

Question 1

(a) Consider the property market in Singapore which are affected by the following incidents:

(i) Singaporeans in general believe that prices of properties will certainly increase in the future.
(ii) Government imposes additional buyer stamp duties when consumers buy their second property onwards.
(iii) Government tightens the import of foreign labourers who are mostly employed in the construction sector.
(iv) Government releases more land for property developments.

Discuss how each of the incident individually affects the demand or the supply of property and justify your answers. Assume that Incident (i) dominates Incident (ii) while Incident (iii) dominates Incident (iv), use suitable property market diagrams to analyse the effects on the equilibrium price and quantity of property when each of the incident occurs separately. (12 marks)

(b) With reference to the determinants of the price elasticity of demand and supply, explain whether the demand for and supply of property is elastic or inelastic. Justify your answers. (8 marks)

(c) Given that the average monthly household income is $2500, the quantity of houses purchased is 3200 units. When the average monthly household income changes to $3300, the quantity of houses purchased becomes 4800 units.

Compute the income elasticity of demand using the mid-point formula and uses it to classify the nature of property. What do you think will happen to the revenue of property developers during recession? Explain. (10 marks)