MAE101: Economic Principles - Terminology - Housing Affordability in Australia - Assessment Answer

Internal Code: 1AGGEC Code: MAE101

Economic Principles Assessment Answer

Assignment Task: MAE101 The aim of this assignment is to examine housing affordability in Australia and to consider some of the economics factors that have made owning a home, increasingly difficult in Australia. Question 1: MAE101

1. Compare and briefly discuss each workmate’s personal experience in relation to housing affordability in their capital city, Melbourne.
2. Based on Cam and Ross’ discussion, list and briefly discuss (2) reasons/factors that have made purchasing a home difficult. MAE101
3. List and briefly discuss (2) strategies offered by Cameron that have enabled him to afford purchasing a property.

Question 2 – Data and Analysis - MAE101 1. Discuss the relationship between the two time-series over the period 1970-2015 and the implications for housing affordability. MAE101 2. Briefly explain the trend in both time-series over the past 2 decades. How would the pattern in rents and housing prices over this period provide a mixed blessing for individuals like Cam and Ross? [Hint: Re-watch the ABC’s ‘Hear Me Out’ exclusive and consider the differences in each person’s circumstances]. Question 3 – Market Analysis - MAE101 According to Daley, J. et al. (2018), the best available estimate of the own-price elasticity of housing supply in the short-run in Australia is somewhere between +0.3 to +0.5, while housing demand has an estimated own-price elasticity of -0.6. 1. What do these estimates tell us about the responsiveness of Australia’s housing supply and demand to an increase in dwelling prices? Remember to use the economic terminology developed in Week 4 lectures and related reading for your interpretation. MAE101 This part requires you to draw your diagram electronically using the Insert ? Shapes feature in MS Word or MS Powerpoint. In the report by Daley, J. et al. (2018), various demand-side and supply-side proposals are put forward to address the problem of housing affordability. These proposals are outlined from pages 97 and 109, respectively. Your task is to choose one of these demand-side measures OR supply-side measures and show its effect on the housing market. MAE101 2. Construct a demand and supply diagram for the housing market. Be sure to give your diagram a title, label your axes, schedules, and equilibria. [Note: You do not need to use actual figures in your diagram]. MAE101 Start by drawing your supply curve to reflect the relative own-price responsiveness of housing supply in the short-run. Now draw in your demand curve to reflect the relative own-price responsiveness of housing. [Hint: Refer to Week 4 lecture materials and Chapter 5 of Gans et al. (2018) on representing relative elasticities diagrammatically]. MAE101 Apply one demand-side OR one supply-side measure to your diagram of the housing market. Make sure you state which factor you have chosen to apply and briefly outline it. Show and discuss the effects it will have on your demand and supply model and the resulting impact it will have on equilibrium price and quantity. MAE101

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