Question 1

please look at my answer 1.4?

Revise the sets of notes included in Units 1 to 3 before attempting this question.

Consider a competitive market for land, in which supply is perfectly inelastic (the amount of land supplied is finite), and the demand curve has a standard shape.

Suppose the government needs X units of land for development purposes, and has two options to obtain the land required. The first option is to expropriate the land, i.e. take the land from the owners without compensating them. This will shift the supply curve to the left, as there will now be fewer units of land available in the market. The second option is for government to participate in the competitive market, shifting overall demand for land to the right while paying the resulting equilibrium price for the land it buys.

Answer the following questions:

1.1Draw a graph indicating the original market for land (i.e. with a standard demand curve, and a supply curve that illustrates a perfectly inelastic supply). Mark the equilibrium point as A.

Note: You can draw the graph using pen and paper, and scan it in or take a photograph to insert into this document. Alternatively, you can digitally create the graph directly in this document. Whichever method you decide to use, it is important that the graph is legible.

1.2Using the same graph drawn to answer Question 1.1, indicate what would happen if the government expropriates the land. Show this by illustrating the shift in the supply curve. Mark the new equilibrium point as B.

1.3Using the same graph drawn to answer Questions 1.1 and 1.2, indicate what would happen if government participated in the market and increased demand. Show this by illustrating the shift in the demand curve. Mark this new equilibrium point as C.

Insert your graph for Questions 1.1, 1.2, and 1.3 here:

1.4Consider how each of the two options provided might impact the price of land. Which option do you think private consumers (i.e. people who are currently in the market to buy land) would prefer, or do you think they would dislike both options? Justify your answer.

Start writing here:

-The Private consumers do not like both of these options. That is because both options will result in an increase in the equilibrium price, which causes private consumers to pay higher prices for the land they wish to buy. The possibility of expropriating the land will move/shift the supply curve to the left and this will result risen of the price. The same if the government buys, the demand for land will increase and this will increase the price of land.