3.

USING APPROPRIATE AND CLEARLY EXPLAINED ILLUSTRATIONS, ANALYSE THE

EFFECTS THE FOUR STATEMENTS WOULD HAVE ON THE MARKET (PRICE AND
QUANTITY) FOR:

(a) condominiums
i. an increase in wages of construction workers.
ii. a substantial decrease in price of public housing.
iii. a recession and a decision by the government to release more
land for condominium.
 Fig 1: SS>DD Fig 2: SS<DD
Price Price
So
So S1
Surplus S1 Surplus
Po Po

P1 P1
D1 Do
D Do
1
Qd Qo Q1 Qs Quantity Qd Q1Qo Qs Quantity
Fig 3: SS=DD
Price
So
S1
Surplus
Po

P1
D1Do
Qd Qo = Qs Quantity
Q1
P.E.E.L WRITING FRAMEWORK
P Point of argument OR topic sentence
E Explain the concept and provide reasoning.
Show reasoning process using economic
concepts/principles learnt.
E Explain with reference to the diagram.
Elaborate/illustrate point using context provided
or examples from within the given context.
L Explicitly link the ideas raised in the paragraph
to the key issue(s) in the question.
RECESSION ON MKT (P&Q) FOR CONDOMINIUM
P The recession has led to a fall in the price and
quantity for condominium.
E In a recession, households experience a fall in
income. This reduces their purchasing power as
they could only afford less goods and services.
Assuming condominium is a normal good, demand
for condominium will fall.
RECESSION ON MKT (P&Q) FOR CONDOMINIUM
RECESSION ON MKT (P&Q) FOR CONDOMINIUM
E Demand for condominium shifts left from D0 to
D1(see Fig 1). At original price P0, there is a
surplus of Q2Q0 as the quantity supplied exceeds
the quantity demanded.
This results in a downward pressure on prices. Qs
will fall and Qd will increase until the new
equilibrium is reached at E1.
As such, with supply held constant, there is a fall
in price from P0 to P1 and a fall in the quantity
from Q0 to Q1.
RECESSION ON MKT (P&Q) FOR CONDOMINIUM
L Thus, the recession leads to a fall in the
equilibrium price and quantity of condominium,
ceteris paribus.
RECESSION AND GOVT DECISION ON MKT (P&Q) FOR
CONDOMINIUM
P The effects of recession and change in
government policy depend on the magnitude of
change in demand and supply.
RECESSION AND GOVT DECISION ON MKT (P&Q) FOR
CONDOMINIUM
E During a recession, households experience a fall
in income. This reduces their purchasing power as
they could only afford less goods and services.
Assuming condominium is a normal good, demand
for condominium will fall.
Govt’s decision to release more land for
condominium reduces the price of land for condo.
This reduces the cost of production for condo.
With the same amt of resources, producers can
produce more condo and supply will increase.
 Fig 1: SS>DD Fig 2: SS<DD
Price Price
So
So S1
Surplus S1 Surplus
Po Po

P1 P1
D1 Do
D Do
1
Qd Qo Q1 Qs Quantity Qd Q1Qo Qs Quantity

Fig 3: SS=DD
Price
So
S1
Surplus
Po

P1
D1Do
Qd Qo = Qs Quantity
Q1
RECESSION AND GOVT DECISION ON MKT (P&Q) FOR
CONDOMINIUM
E Demand for condo falls from D0 to D1 while supply
increases from S0 to S1.
At original price P0, there is a surplus of QdQs as the
Qs exceeds Qd. This results in downward pressure on
price. As price fall, Qs falls and Qd increases.
If supply increases more than fall in demand as
shown in fig 1, price fall from Po to P1 and quantity
increases from Qo to Q1.
If supply increases less than fall in demand as shown
in fig 2…
RECESSION AND GOVT DECISION ON MKT (P&Q) FOR
CONDOMINIUM
L Thus, the effects of recession and change in
government decision on market of condominium
depend on the magnitude of shift of demand and
supply.