a) From the above article, the expected increase in residential property prices are by demand factors.

` P D0 D1 S

Q From the graph above, we can see that when the demand curve shift from left to right, the price will increase from P0 to P1, and the quantity will increase from Q0 to Q1. Limiting of units offered and other factors such as relaxation of some rules in home financing, low interest rates and tax deduction will increase the demand for residential property. Hence, from the graph, the price will also increase.

b)

3 other factors that may bring an increase in the price for houses are: i. Increase in income ii. Increase in the price and cost of materials iii. Strategic location of the houses which includes public facilities, infrastructure, and active economic activities. Overhang occurs when there is more supply than demand. Overhang indicates that there are no buyers. To avoid overhang, the supply should be decreased. Also, developers should try to create limited units that must be taken up urgently (eg: limited time only). P D0

c)

S0

S1

P D0

S1 S0

Q In order to avoid future overhangs, the supply curve should be shifted to the left (to indicate decrease in supply) which resulted in Q1 (which is less quantity than Q0). This will create a higher demand, and price will increase from P0 to P1 .

d) i. Fairly elastic demand is a condition in which a small percentage change in the price of a product will lead to a larger percentage in change in quantity demanded. ii. P0 Q0 TR0

20 100 2000

P1 Q1 TR1

25 70 1750

From the table above, when the price of house rises from 20 to 25 (25% increase), quantity will drop from 100 to 70, hence, total revenue will drop as well from 2000 to 1750. However, if the demand is inelastic, where d < 1, even though the price of houses increase and the quantity decreases, the total revenue will still increase due to increase in demand as buyers will still buy the houses (due to increase in demand).

e) The possible impact on the market price and quantity of residential property is that the demand curve will move from left to right, indicating a decrease in demand. This happens when buyers buy more commercial property, which in turn will cause the price of commercial property to increase. Increase in the price of substitute (in this case, commercial property is a substitute for residential property) will cause the price of the other substitute (residential property) to decrease, and demand for residential property will decrease.