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Economics Assignment
Economics Assignment
Economics Assignment
[Name of the Writer]
[Name of the Institution]
Economics
Economics Assignment
(i)
In the graphical illustration given above, the variation in the general level of the activities
of the business, which is requirement of space, will affect the rental rates, the operating expenses,
and the level of vacancy. Thus, the rate of rent that is currently being paid for the property will
change. This results in the shifting of demand curve to the right side.
With the shift of demand curve to the right it is clear that there is an increase in the space
requirement for the office. This variation in the demand curve for the office space, are a result of
variation in the increase in the total number of tenants, and changes in the operating expenses.
These are the changes resulting in the rightward shifting of the demand curve. Since it is stated
that this rightward shifting in the graph is a result strong rise in GDP growth (Zheng et.al, 2010),
thus it results in an increase in the number of employees which automatically results in the
Economics
expansion of space, for which the rental amount increases. As a result of the increasing operating
income, the prevailing prices of the real estate also become much more attractive. Thus, under
this scenario, the investors shift their assets into the real estate to fulfil the requirements of the
increasing office staff, which increases the quantity demand at every possible price.
With this general level of increase in rental value of real estate, there will be a change in
the relative desire ability and it will result in the transference of resources. Thus, an increase in
the amount of rent due to the demand of more space shifts the graph rightward. These altered
yield expectations are considered as an expectable substitute for the real estate, as this will
change the relative desirability by causing a transfer of resources. This increase in the renting
space results in the shifting of demand curve to the right side. Below is the representation of the
change in equilibrium after the shift in the demand curve.
Economics
Economics
(ii)
Many people assume that there is a direct relationship between the rental, capital, and
development market. However, statistics indicates that there is either a direct or causal
relationship between these three markets. All of these markets are a part of the larger economy.
The capital market markets performance in an economy reveals the fundamental corporate
performance. The performance of the real estate market reflects the performance of the property
market. Finally, the performance of the development market reflects the performance of the
countrys economic market as a whole. For most of the firms, property serves as a production
factor as well as an asset (Gross, 2013). Corporate growth in profitability automatically leads
towards the corporate expansion. Under good economic condition this leads towards a rise in the
renting prices with an increase in the demand. This rise in rent lead towards rise in capital values
in the property market resulting in raising the net asset value in the capital market, and as a result
of these the economic market of the country develops with investors coming in to invest in the
businesses.
The changes in microeconomic and macroeconomic factors over the time influence these
markets in numerous zones, for example, prices, demand, supply, and the cost, and the rate of
return. For UK, the scene or real estate in UK advanced changing the substance of significant
urban communities over the UK. The real estate industry indicated critical changes amid the five
years communicated by a substantial development tasks going from private, business, tourism,
and industrial estates (Engle et.al, 2013).
The strength and weakness of the U.K development market to impact both capital market,
and rent prices. While this is not amazing, it doesn't show some other immediate relationship
between the three measures. A simple illustration of this could be a solid economy normally
emphasizes appeal for items and administrations, including real estate and investments. Amid
these times of general success and demand, you could substitute cars, fridges or furniture at
Economics
home costs and experiences the same general increase, further affirming the absence of a
relationship.
Rise in inflation has the same impact on rental, capital market prices, development
market, which increment amid inflationary periods. Expanding inflation depreciates the U.K.
GBP, driving prices for resources upward. Indeed low inflation rates, for example, those seen
somewhere around 2007 and 2013, energy capital market prices to climb. While from time to
time as emotional as the runaway prices amid the housing rise from the early 2000s through
2007, home prices, capital market prices, and development rate increment respectably over the
long run. On the other hand, no factual confirmation demonstrates that home prices impact
capital market prices and development market.
Economics
Economics
present value of an aggregate of money got today does not change. Hence, 100,000 got on the
property today has a present value of 100,000 GBP. Then again, this value changes when
alluding to an aggregate of money to be gotten later on.
To focus the current value of money in the add up to be gotten in one year, decide the
amount of money you need to contribute today for the last measure of the same. That 100,000
GBP probably won't has a present value of 100,000 in the event that it will be held for one year.
The present value of an aggregate of money that is held on the property can be found by
separating the measure of money for the premium rate. At an investment rate of five percent,
from 100,000 GBP which is held for one year has a present value of just 95,000 GBP. This is on
account of GBP 95,000, if got today and has contributed at an investment rate of five percent,
would 100,000 later that year. The more extended a measure of money the more it loses value is
held.
The mainstream outflow "time is money", has turned out to be very precise when you
consider the time value of money. This idea is fundamental to comprehension the significance of
ventures.In business concepts are applied in the same way, except they are given different names
to them call them the nominal interest annual and annual effective interest rate. It is determined
that the nominal rate is the rate that is agreed between the lender and the borrower, while the
annual effective rate (TEA), or true, is the rate that effectively was paid or earned, we are
including the time and value of the cost of money at that time.
We can express the annual effective rate (TEA) as follows:
TEA = (1 + i / n) n -1, assume one example where we want to calculate the effective rate
of a nominal rate a business concern us.
The annual nominal rate is 8%, and payments are made monthly
As there are 12 months in the year, we have 12 periods are represented as n
Develop the equation and look at the result
TEA = (1 + 0.08 / 12) 12 -1 = (1 + 0.0066) 12 -1 = 1.08299951 -1 = 0.08299951 or
8.299951%.
The interest rate of 8.299951%, was the amount actually paid for that business.
Economics
References
Dey, J. K., Mondal, S. K., & Maiti, M. (2008). Two storage inventory problem with dynamic
demand and interval valued lead-time over finite time horizon under inflation and timevalue of money. European Journal of Operational Research,185(1), 170-194.
Engle, R. F., Ghysels, E., & Sohn, B. (2013). Stock market volatility and macroeconomic
fundamentals. Review of Economics and Statistics, 95(3), 776-797.
Gross, J. (2013). How can the Demand Curve be derived from the Utility Maximum Principle?.
Wong, J. D. (2008). Time Value of Money. In Encyclopedia of Public Administration and Public
Policy, Second Edition (pp. 1923-1930).
Zheng, Y., Kinnucan, H., & Kaiser, H. (2010). Measuring and testing advertising-induced
rotation in the demand curve. Applied Economics, 42(13), 1601-1614.