THE INTERDEPENDENCE

OF MARKETS
A TALE OF DEMAND AND SUPPLY

ANNEX WAMALWA
SEVASTI LAMBROU
NIKOS DARIVAS
 ABERDEEN has been
known as the off-shore
capital of Europe since the
discovery of the north sea
oil in 1970
• The discovery of oil in the north sea caused an economic boom
• A huge demand for housing, hotels, construction sites, shipping and labour were followed
• Hundreds of jobs were created as oil production grew faster than in any other major petroleum
province in the world

• Aberdeen university’s professor (Alexander Kemp) said that “the discovery of forties in 1970
changed everything, because it was clearly a huge field.”
THE CONSTRUCTION PHASE WOULD
BEGIN
• New buildings required
• New roads to be constructed
• Land would have to be excavated
shafts shunks
• Construction workers were required
• Workers from other areas came to
Aberdeen

• Local workers moved from their jobs to

the mine because of high wages
AS A RESULT
WAGES WERE
DRIVEN UP
 HIGHER WAGES
WILL FORCE UP THE
PRICE OF LOCAL
SERVICES TO
REDUCE THEIR COST
 EMPLOYEES
WOULD BE
BROUGHT FROM
OUTSIDE DUE TO
THE TEMPORARY
NATURE OF THE
JOB
 RENTED ACCOMODATION
IS NEEDED SO RENTS WILL
RISE

D   S   P
MONEY WILL BE
SPENT AT LOCAL
SHOPS
THE MINE FINALLY
CAME INTO
OPERATION IN
1975
MINEWORKERS WILL BE
EMPLOYED
Permanent accommodation required
this will drive up the demand of houses and
prices for the house will increase
The house builders anticipate
the influx of labour and new
houses are already being built
this will create a demand for
building workers and building
materials
 AS A RESULT
HOUSE PRICES
DRIVE UP
 NEW HOMES GETTING BUILT RAISE OF

RAISE IN DEMAND OF NEW HOMES THE HOUSE

DEMAND OF BUILDING WORKERS PRICES
AND BUILDING MATERIALS

HIGH COSTS
SO WHAT HAPPENED IN ABERDEEN?

HTTPS://WWW.YOUTUBE.COM/WATCH?V=W9YE04JL-9S
SO WHAT HAPPENED IN ABERDEEN IN 1970-1980?
UK
• 1972: OFFICIAL STRIKE WON INCREASED WAGE
• 1981: RECESSION
• 1985-1988: “LAWSON BOOM” BY MARGARET THATCHER
• 1980’S DECREASE OF UNEMPLOYEMENT
• 1989 – 1993: DECREASE OF HOUSE PRICES

ABERDEEN
• 1971: DISCOVERY OF THE FORTIES FIELD
• 1985-1988: DECREASE OF THE HOUSE PRICES BY 10% A YEAR
• 1989 – 1993: INCREASE OF THE HOUSE PRICES BY 35% A YEAR
BECAUSE OF THE BOOM IN THE OIL INDUSTRY IN THAT PART OF SCOTLAND
The movement into the area of oil workers and workers in the construction industry related to the
oil industry led to an increase in the demand for houses. In the mid 1980s the number of workers
connected to the industry in the area declined and with it the demand for housing.
THE EFFECTS WOULD BE THE REVERSE OF THOSE DESCRIBED IN THE CASE.
As people moved out of the area" the demand for local goods and services would fall. This would
lead to a fall in local wages and local prices )e.g. the price of houses and the price of local
services*.
In the period from 1985 - 1988,
when the rest of the country
enjoyed the so-called "LAWSON
BOOM", the oil industry was in the
doldrums and house prices were
falling in Aberdeen by 10% a
year. "PEOPLE WERE SO DESPERATE
THEY JUST HANDED IN THEIR KEYS
AT THE BANK AND SAID, `DO YOUR
BEST,'" MR SHEPHERD RECALLED.
EFFECTS OF THE MINE CLOSURE
• CUT DOWN OF THE LABOUR IN THE MINE

• THE LABOUR MOVE AWAY TO FIND NEW JOBS

• DECREASE OF SUPPLY OF JOB VACANCY FALL OF THE

• DECREASE OF SALARIES
HOUSE
• LOCAL SHOPS LOSE THEIR CLIENTS

• FALLING PRICE OF THEIR PRODUCTS PRICES

• LOCALS LOSE THEIR JOBS SO EMPLOYERS CAN REDUCE THEIR COST

• PRICES OF ALL SERVICES AND PRODUCTS FALLS

THANK YOU!