Four Basic Principles That Underpin Construction Projects Economics Essay

Four Basic Principles That Underpin Construction Projects political saving EssayConstruction economics like pure economics, its mainstream equivalent is come to with the allocation of simply resources. This is far more complex that as it root appears. M roughly(prenominal) of the worlds resources ( itemors of takings such as land, childbed, uppercase and enterp organize) be finite, insofar commonwealth fork up infinite wants. We are at that placefore faced with a twain-pronged problem at both point in time at that place is a fixed stock of resources, set against legion(predicate) a nonher(prenominal) wants. In an cause to reconcile this problem, economists argue that people must make careful choices, in terms in facial expression choices ab unwrap what investments are make, how these are constructed and on whose behalf.Construction is greatly dependent on the changes in the UK economy, and particularly on those which are the direct sequel of the g overnment poli cy. Construction output is a response to the contract for constructings, and this is resultant of derived take up for opposite products and assistance. Variations in the rude national product go away, in this way, influence the demand for plait motion and the associated take of transaction.There are four basic principles that underpin verbalism projects lend, demand, foodstuffs and types of business.SupplyThe word impart used in economics is usually define as the total amount of healthy or service available for purchase along with demand, one of the two key determinants of hurt. This translation states that depict sack be calculated by looking at the demand.Supply ordure in addition be affected in numerous ways the main one being demand. eve so in that respect shadower be different factors that can affect supply as well, it could be the outlay of other(a) connect goods for voice paper is made from trees, on that pointfrom a tree would be conside sanguine a related good to paper. If the price of harvesting a tree maturations the supply for paper will decrease.The contention marked S is the supply curve. The curve depicts the affinity between two variables that the price and measure supplied. The supply curve can besides shift left or right if there is an increase of supply for a certain product of service, it will increase the quantity and avoid the price.A change in supply refers to a change in behaviour of sellers caused because a factor held constant has changed. As a result of a change in supply, there is a current relationship between price and quantity.As the supply has changed or shifted to the right, we can turn back that the quantity has change magnitude nevertheless the price has decreased.Supply must forever and a day be looked at when beginning a construction project, for event if the supply of living accommodations has decreased there would be no point in purchasing a house for refurbishment and s elling it on as the demand would bring in to a fault decreased. Therefore when beginning a project, the related supply should be checked carefully and the project should be started at the estimated time of equilibrium.DemandThe word demand is used widely through with(predicate) out the economics world and it simply means trust, a desire for someone to own a good or service also having the ability and willingness to comprise.Just like supply there are several(prenominal) factors that can affect demand the main one being supply. However there are other factors that can also affect demand this can be the price of related good or even income. The more income a person claims it is more in all likelihood that they will debase something. The preference of a certain good can also increase demand, for recitation if a large amount of people prefer a pair of jeans over a pair trouser then the demand for jeans will increase and the demand for a pair of trousers will decrease.The red li ne shows the demand curve. The curve is two dimensional and depicts the relationship between two variables only price and quantity demanded.Looking at the diagram on the right, we can see the red demand curve, there is a shift to the right, this tells us that the demand has change magnitude thence supply has increased along with the increase of price and quantity. For example, there would be a fulminant demand for pancakes on Pancake Day, because of this the supply will increase, the price and quantity will also increase.Elasticity of demand can be defined as, the responsiveness of quantity demanded to a change in price. (John Sloman, 2003, page44). If the price elasticity of a product is cognize then predications can be made on the effect of price and quantity for a supply curve. The size of it of change in supply and in demand can be calculated for comparison. It is measured in per centage.This graph shows three constant-elasticity demand curves. D1 is a vertical curve the quantity does non change if the price changes, therefore it has zero elasticity.D2 is a horizontal curve this is infinitely elastic. Any price below P0 gives an infinite demand and any price above gives a demand of zero. The curve D3 if unitary elastic, this means when there is a executeing(p) percentage change in the price of the good it will result in an identical percentage change in the quantity that is demanded.In terms of a construction demand is very similar to supply, for example after completing refurbishment works on a house, it should non be sold immediately. It should be sold at a equal time it should be sold when the demand is high. The creator for this is, when the demand for housing is low the price of the house will decrease, and when the supply increases so does the price.MarketsA command economy is where supply is controlled by the government, they decide what type of good and services are inviteed and decide how they are distributed.A save market economy i s all allocation of scares resources is determined by supply and demand. There is no control from the government, and there is free trade without any major(ip) problems.A mixed economy has the best of both there are parts of the command economy and parts of the free market economy, a mixed economy is an economic systems that allows for the simultaneous operation of in the customary eye(predicate)ly and privately owned enterprises.Depending on the type of market there is a construction project can be affected in many a(prenominal) ways. For example a command economy will just build houses if they are needed, they will sell house if they need to be sold, and there is little room for choice. A free market will build entirely out of will if it is needed then it will be built. If someone has the desire and the correct funds to build a house, then they will. And if someone wishes to purchase a house, they will agree an amount and pay it send off.As above a mixed economy is the best of both, nevertheless in many circumstances the price for housing price does rise and hang up. But, anyone person can build at their own will, but they will need planning permission.Types of BusinessThere is a large expiration of business structures they all throw off different purposes but all have the kindred goal to be successful. The types of business are a bushel traders, partnerships, public bound companies, private contain companies, housing associations, non-profit making organisations.A sole trader is an individual owns and runs their own business without the need for employees. For example this could be a small corner shop.A partnership is there are two or more people working in concert to make a profit. The partners together own the business and regularly fortune out profits equally between each other. This could be a small/medium sized grocery store.A public limited company (legally abbreviated to plc with or without full stops) is a type of limited liability Comp any in the United Kingdom and the Republic of Ireland (and other jurisdictions where companies law is derived from English law) which is permitted to offer its shares to the public. For example Natwest bank is a public limited company.Housing Associations provide housing, they are more commonly known as Registered Social Landlords or RSL for short. They function as a normal business and any profits that may be made a put back into the business, so it is a non-profit making business. An example of a housing association is London and Quadrant housing trust.Non-profit making organisations tend to help the local area or community and all surpluses are non distrusted but it is put back into the company to help it beat and achieve its goal.When the recession take in the UK the supply and demand for housing were affected. Banks were non lending specie for people who wanted to buy houses and many people were not involutioned in buying at all, as interest rate were too high. Therefore the demand for new housing dramatically decreased as a consequence the supply also decreased. scarcenessScarcity is the fundamental economic problem of having seemingly unlimited adult male needs and wants, in a world of limited resources. It states that society has stingy productive resources to fulfill all human wants and needs.1Certain goods are likely to remain inherently scarce by definition or by design examples include land and positional goods such as awards generated by honor systems, fame, and membership of elites. These things are say to derive all or most of their value from their scarcity. This can be a large problem, many thing in the world are scarce this includes land, food, and other resources. For example land is a scarce resource as there is only a limited amount available, but it is always in demand. Also, scarcity can affect many things in construction for example earthy materials are a scarce resource as it is always in high demand. Raw materials are sold i n what is called the factor market. This is because lancinate materials are factors of production along with labour andcapital. Raw materials are so important to the production process that the success of a countrys economy can be determined by the amount of natural resources the country has at bottom its own borders. A country that has abundant natural resources does not need to import as many raw materials, andhas an opportunity to export the materials to other countries.2Timber being a raw material, is a very scarce resource as the amount of time taken for it to grow is not quick enough for the ever growing human demand.Task 2The construction industry is heavily reliant on borrowing money to slay many projects. Many people can not concede to pay off a construction project completely. Hence, when the rescission hit the United Kingdom it had a large affect on it. Banks could not afford to lend any money that would go towards constriction projects from this heartbeat on the cons truction industry is still suffering as clients can not get hold of necessary funds to pay off the contractor.Due to the down menstruate of the construction industry the housing industry has also stemmad as a result of this. Office for National Statistics modelling suggests that the area bloodd by 0.7 per cent in the first quarter of 2010, following the 0.9 per cent fall in the terminal quarter of 2009. UK GDP as a whole rose 0.2 per cent in the first quarter of 2010, the same data revealed. The weak data suggests that the brief growth period in mid-2009 was a false dawn as the construction orbit has lagged fucking ever since. Most predictions had suggested that 2010 would see further decline in construction, however, with many predicting falls of around 5 per cent this year to add to the range digit declines of 2009. While the reasons for the further contraction in the sector were unclear, some surveys have suggested there is lower spending in the public sector as projects a re delayed in the run up to the option on 6 May. The rate of growth in the whole economy of 0.2 per cent is a slowdown from 0.4 per cent growth in the final quarter of 2009.3The UK government has plans for public spending and it is hoped that these will include major construction projects, such as roads, schools and other public buildings. This would help the construction industry and those companies that supply the construction industry to ensure continued employment for many.Construction accounts for about 6 per cent of the economy, but analyst said that, despite its modest size, the rapid deterioration in the sector does not bode well for the economy, particularly following poor manufacturing figures last week.4 quite simply the main economic problem in construction is the fact that no one wants to build anything, because they can not build anything if they have no money. When a construction project commences the client needs to get a hold of enough funds to be able to complete the project.Since the recession many construction projects have been put on hold, the reason for this is that bank were reluctant to give out any loan and any loan that they did give had very high interest rates, as a result of this many people were put off to even realize taking out a loan. Hence many people have been made redundant as companies could not afford to keep them employed. As more and more people became redundant, people became competitive, to try and fight for their job. provided after the recession can work go back to normal, but it will take time for construction projects to go back how they were as construction projects are very expensive, and many of them are based on credit or loans given out by banks or other similar sources.The term business cycle (or economic cycle) refers to economy-wide fluctuations in production or economic activity over several months or years. These fluctuations pass on around a long-term growth trend, and typically involve shifts over t ime between periods of relatively rapid economic growth (expansion or boom), and periods of relative stagnation or decline (contraction or recession). These fluctuations are often measured using the growth rate of real gross home(prenominal) product. Despite being termed cycles, most of these fluctuations in economic activity do not follow a mechanical or predictable biannual pattern.5Construction activity in the UK continued to decline in Q1 2009, but at a marginally slower pace than in Q4 2008. The loot balance of surveyors reporting a decline in activity increased from -47 to -45. All sectors experienced declines in workloads, although such declines moderated in the private and, particularly, the public housing sectors. Private industrial and private commercial workloads continued to fall at pretty much the same rapid pace as in the previous quarter. Meanwhile, declines in infrastructure workloads accelerated and public non-housing workloads resumed their decline having incre ased in the previous quarter.Private housing workloads continued to fall sharply Q1 2009, but a slower pace than in Q4 2008. Workloads knock down at a slower pace in the South West, the Midlands/ einsteinium Anglia region, the North, Scotland and the London/ South east region. In Wales, workloads continued to fall at the same sharp pace as in the previous quarter. In Northern Ireland, private housing workloads fell at slower pace. exoteric housing workloads continued to fall, but only mildly. Workloads increased in the Midlands/ East Anglia region, they stabilised in Wales and they fell elsewhere. In Northern Ireland and Scotland, the pace of decline in public housing workloads picked up sharply.6 swell tolls are costs incurred on the purchase of land, buildings, construction and equipment to be used in the production of goods or the rendering of services. In other words, the total cost needed to bring a project to a commercially operating(a) status. However, capital costs are not limited to the initial construction of a factory or other business. For example, the purchase of a new machine that will increase production and last for years is a capital cost. Capital costs do not include labour costs except for the labour used for construction. Unlike operating costs, capital costs are one-time expenses, although payment may be spread out over many years7in financial reports and tax returns. Capital costs are fixed and are therefore independent of the level of output.