Essential service by governments

Provision of housing has become an essential service by governments all over the world. Populations continue to rise and thus exert pressure on the existing land. Such of better living has made many to move to urban areas where there are opportunities. This has made it difficult for governments and local authorities to provide adequate facilities for their residents. Most affected is the provision of housing to cater for the ever increasing populations. To try to bridge the gap, private developers have come in to put up housing units to these populations at prevailing market rates.

Nielsen (2007) in his article published on ‘Articlesbase’ says that “When applied to real estate, the principle of supply and demand refers to the ability of people to pay for housing coupled with the relative scarcity of real estate”. In this discussion we shall start by looking at the theories behind demand and supply. Introduction. Demand can be defined as a schedule that shows various quantities that consumers are willing and able to buy at a given time, other factors being constant. Below is a schedule of demand and a corresponding demand curve. Source:http://scribd. com

When we develop a demand curve, it is only the demand and price that change. Everything else will be assumed to be constant. From the demand curve, there exists an inverse relationship between the quantity demanded and price. This is referred to as the law of demand. The law states that ‘if the price goes up the quantity of goods demanded goes down, and if price decreases, the quantity of goods demanded goes up. As it is evident from the demand curve, an inverse relationship is represented by downward sloping curve from left to right. Downward sloping is due to the diminishing marginal utility of the commodities. Change in quantity demanded

When the price of a commodity changes, the demand for that commodity will not change but it is the quantity of the commodity demanded that will change. An illustration is shown in the graph below: Source:http://scribd. com From the above graph, when the price of the commodity changes from $6 to $9, the quantity of the commodity will change from 5 to 3. It can be realized that this change has not affected the demand schedule or the demand curve. The change is a movement along the same curve. The demand curve will shift to the right when there is an increase in demand. This means that the quantities will increase for the same prices.