The topics of supply and demand in a market economy are essential. The order affects supply, and fluctuations in demand directly influence pricing. By reacting to supply and price fluctuations in a certain way, consumer demand contributes to the technological component of production, creating conditions for optimizing the production chain. The situation presented in the article is somewhat ambiguous; real estate in England is on the agenda (“House prices set to continue rising,” 2021). With a decrease in supply, the demand for housing does not weaken, and this situation contributes to the growth of housing prices.
The number of new properties entering the market fell by a third. Without weakening demand, all parts of the UK continued to report sharp increases in house prices. Forecasters note that house prices will continue to rise in the current situation. As demand grows and supply continues to fluctuate, a certain “balance is not observed,” and the problem in the market is as shown in chart D. (Martin et al., 2017, p. 176). The case is the same as rental housing; demand has grown, “stimulating the rental market and increasing its value” (Sakyi, 2020, p. 73). Compared to previous data, the growth is about 12%, significantly higher than last year’s figures. As a result of the shortage of real estate, surveyors also report a decrease in supply, increasing rental prices.
To conclude, chart D applies to the situation when some of the factors determining the supply change so that the supply decreases. The supply curve shifts inward, which means that suppliers can bring fewer products at higher prices. It causes an increase in the price, and the buyer is ready to consume the goods or, in this case, purchase real estate or rent it at the declared price. This is how the laws of the market work in the given situation on the market with the issue of real estate.
References
House prices set to continue rising as supply shrinks. (2021). BBC News. Web.
Martin, G., Rentsch, L., Höck, M., & Bertau, M. (2017). Lithium market research–global supply, future demand and price development. Energy Storage Materials, 6, 171-179.
Sakyi, K. A. (2020) Managerial Economics – Demand and Supply. International Journal of Research and Innovation in Social Science, 4(7), 71-74.