TAKE HOME

COURSE TITLE PRINCIPLES OF ECONOMICS

INSTRUCTIONS ANSWER ALL THE QUESTIONS

QUESTION 1

Explain the following as applied in construction economics.

a) Productive efficiency.
b) Allocative efficiency.
c) Equity.
d) Horizontal equity.
e) Vertical equity.
f) Private costs.
g) External costs.
h) Types of Sustainable construction.

QUESTION 2

a) What are a Transaction Costs?

b) Explain the main transaction costs which affect the construction industry.
c) Explain the criteria that premise the understanding of the use of supply and demand diagrams in an
analysis.
d) What is an equilibrium position in demand and supply analysis?

QUESTION 3

a) State the main assumptions underlying the production possibility curve.

b) Explain the factors that influence labour hours available for work in the construction industry.
c) Comment on the factors that influence productivity in the construction industry.

QUESTION 4

a. State the law of Demand.

b. It is difficult to envisage just one housing market in an economy. Identify the four sectors.
c. The demand for the repair and maintenance of buildings and infrastructure cannot be ignored since
it accounts for the biggest area of activity in the construction industry. State four factors that affect
the demand for repair and maintenance.
d. Explain the Factors affecting the supply of any product in the construction industry.

QUESTION 5

a. In purely economic terms partnering helps to eliminate inefficiency in so far as costs per unit of output
are reduced. State the benefits of partnering in the construction industry.
b. What is a firm?
c. Distinguish between Accounting costs and economic costs.
d. State the law of diminishing returns.
e. How does the concept of scarcity relate to economics in the context of building technology?
f. Explain the difference between microeconomics and macroeconomics.

1
QUESTION 6

a) What is aggregate demand and how is it define by formula?

b) What are endogenous variables in construction economics?
c) What is the expenditure approach to the determination of GDP?
d) Distinguish between gross domestic product (GDP) and gross national income (GNI)
e) State four Macroeconomic objectives in any economy.

QUESTION 7

a. Classify the costs items shown in Table 1 into Fixed costs and variable costs.

Table 1 Typical construction costs

Examples of construction costs
Labour used on site
Materials used on site
Equipment used on site
Site management
Tendering for future contracts
Head office bills for energy, water and rates
Wages for permanent head office staff
Bank interest and leasing costs
A sufficient (normal) level of return to keep the entrepreneur in the industry

b. How does inflation impact construction projects?

c. State three key things the simple circular flow model highlights in construction economics.
d. Give two examples of leakages in the circular flow model.