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ABA 2307 B.Arch 3 rd Year 2015
ABA 2307
B.Arch 3 rd Year 2015

BUILDING ECONOMICS

Lecture 3 & 4

Construction Demand & Supply I Today's lecture plan, we will look at  Introductions 
Construction Demand & Supply I
Construction Demand & Supply I
Construction Demand & Supply I Today's lecture plan, we will look at  Introductions  Law

Today's lecture plan, we will look at

& Supply I Today's lecture plan, we will look at  Introductions  Law of demand

Introductions

Law of demand & its determinants

Law of supply

Relationship between demand & supply

Determinants of construction demand

Introduction  In economics, the term demand refers to the amount of a good or
Introduction
Introduction
Introduction  In economics, the term demand refers to the amount of a good or service

In economics, the term demand refers to the amount of a good or service which consumers

are both able and willing to purchase per unit of time at all alternative prices

The qty demanded is the amount of a product people are willing to buy at a certain

at all alternative prices  The qty demanded is the amount of a product people are

price

Introduction cont’d  The relationship between price and quantity demanded is known as the demand
Introduction cont’d
Introduction cont’d
Introduction cont’d  The relationship between price and quantity demanded is known as the demand relationship.

The relationship between price and quantity demanded is known as the demand

relationship.

and quantity demanded is known as the demand relationship.  Supply refers to the amount of

Supply refers to the amount of good or service which sellers are willing to sell at all alternative prices

 Supply refers to the amount of good or service which sellers are willing to sell
Law of demand  It states that, if all other factors remain equal, the higher
Law of demand
Law of demand

It states that, if all other factors remain equal, the higher the price of a good, the less people will demand that good.

Meaning the higher the price, the lower the quantity demanded

of a good, the less people will demand that good.  Meaning the higher the price,
Demand curve
Demand curve

A, B and C are points on the demand curve. Each point on the

curve reflects a direct correlation between qty demanded (Q)

& price (P).

1.
1.
Determinants of demand
Determinants of demand

price of the commodity,

2. Consumers’ tastes and preferences,

3. The number of consumers considered,

and preferences, 3. The number of consumers considered, 4. Consumers’ income, 5. The prices of related

4.

Consumers’ income,

5.

The prices of related goods,

6.

The range of goods available to consumers

7.

Consumers’ expectations regarding future prices


Law of supply
Law of supply

The law of supply demonstrates the

quantities that will be sold at a certain price

This means that the higher the price, the higher the qty supplied. Producers supply more at a higher price because selling a

qty supplied. Producers supply more at a higher price because selling a higher qty at a

higher qty at a higher price increases revenue.

Law of supply
Law of supply

A, B and C are points on the supply curve. Each point

on the curve reflects a direct correlation between

qty supplied (Q) & price (P)

Relationship btn demand & supply  It shows that demand is inversely proportional to price
Relationship btn demand & supply
Relationship btn demand & supply
Relationship btn demand & supply  It shows that demand is inversely proportional to price while

It shows that demand is inversely

proportional to price while supply is directly

proportional to it

to price while supply is directly proportional to it  Demand for built facilities – i.e.

Demand for built facilities i.e. constructed space comes from 1 st order primary needs for shelter to the higher order needs for

production of goods and services

Relationship btn demand & supply  This demand translates into construction demand , which in
Relationship btn demand & supply
Relationship btn demand & supply
Relationship btn demand & supply  This demand translates into construction demand , which in turn

This demand translates into construction demand, which in turn translates into

into construction demand , which in turn translates into construction supply – commonly termed construction

construction supply commonly termed construction output.

Demand is the value of contracts for new construction work awarded to main

contractors including speculative work

Relationship btn demand & supply  while construction output is the amount payable to contractors
Relationship btn demand & supply
Relationship btn demand & supply
Relationship btn demand & supply  while construction output is the amount payable to contractors for

while construction output is the amount

payable to contractors for work done in the

relevant period

payable to contractors for work done in the relevant period  Therefore, construction demand normally leads

Therefore, construction demand normally leads to construction output spread over a period of time

Determinants of Construction Demand 1) Availability of credit 2) Condition of the existing stock of

Determinants of Construction Demand

Determinants of Construction Demand 1) Availability of credit 2) Condition of the existing stock of built
Determinants of Construction Demand 1) Availability of credit 2) Condition of the existing stock of built

1) Availability of credit 2) Condition of the existing stock of built facilities 3) Economic conditions economic growth & development 4) Exchange rates 5) Government action policy & expenditure 6) Household disposable income 7) Household formation rate

8)
8)

Determinants of Construction Demand

8) Determinants of Construction Demand Interest rates 9) Inflation 10) Money supply 11) Peoples tastes &

Interest rates

9) Inflation 10) Money supply 11) Peoples tastes & preferences for housing, entertainment etc 12) Planning regulations 13) Political climate conflict, governance, security etc

Political climate – conflict, governance, security etc 14) Population (size, structure and geographical

14) Population (size, structure and geographical distribution)

Determinants of Construction Demand 15) Prices – tender prices, property prices & import prices 16)

Determinants of Construction Demand

Determinants of Construction Demand 15) Prices – tender prices, property prices & import prices 16) Output

15) Prices tender prices, property prices & import prices 16) Output 17) Taxation 18) Technology 19) Unemployment 20) Weather conditions.

prices & import prices 16) Output 17) Taxation 18) Technology 19) Unemployment 20) Weather conditions. 15
Economy & Construction Investment
Economy & Construction Investment

A country’s economy and its construction investment



Determinants of Construction Demand

 Determinants of Construction Demand > 50% of the determinants of construction demand listed above are

> 50% of the determinants of construction

Demand > 50% of the determinants of construction demand listed above are economic factors ◦ A

demand listed above are economic factors

A country’s economy & its construction investment are interdependent; their causal relationship is bi-directional

Construction investment may be growth dependent or growth initiating.

Questions?
Questions?