Construction Economy

1.0 Introduction

1.1 General Introduction of Economics Generally, economics is the wealth and resources of a country or region. There are many aspects that are taken when it comes to the economics in a country which are the production and consumption of goods and services, efficiency, resources, demand and supply in the market, cost, profit and etc. Each of the aspects plays an important role in maintaining and developing the economics value in a country. For example, resources. Resources are used to produce goods and services and this is called the factors of production. The goods and services created are all depend on the demand and supply rate in the society standard living. The higher the demand and supply rate of in

The government of a country can pursues the policy of public or private sector led growth. This is to enable the construction’s resources to be utilized and plan earlier during pre-construction stage. The government’s budgetary constraints also can be the limitation in the demand of the construction work due to the decreasing economic value in the country.

The government is also the one that determines the taxes in the country from the people or industries. For example, the construction industry in Sri Lanka has been given a boost by the government in which the tax rate in the country has been reduce from 35% to 15% and even, an exemption from duty on imports of machinery and equipment. Hence, this enables the demanders to whether or not, invest in the specific construction project.

3.1.2 Economic Growth

The increasing of the economic growth will favourably affect the construction sector, as there is a close relationship between the growths of the two

Hence, by increasing the rent price for the people to pay every month makes the option of buying a house to be better than renting. Hence, the demand for houses will increase and again, cause a shifting in the demand curve.

3.2.3 Interest Rate

Interest rate has been one of the demand factor because it affects the cost of monthly mortgage payments. High interest rate will increase the cost of mortgage payments, resulting in the lower demand for buying a house. This will make the option of renting a house sounds better since the interest rate has a bigger effect to the owners if they have large mortgages. For example, in 1990-1992, the sharp rise in interest rates caused a very steep fall in United Kingdom house prices because homeowners could not afford the rise in interest rates.

Supply

The typical market supply curve consists of price of the houses and the quantity of the houses provided. The law of supply for housing is similar as any other goods and services which consists of:-

• As the price of the housing increases, the quantity of houses provided by the people will