Chapter 12 Flashcards
For any economic good to have value it must possess four elements:
Desire
Utility
Scarcity
Effective Purchasing Power
Utility and scarcity are _____ factors. Desire and effective purchasing power are ______factors.
supply, demand
“A purchaser’s wish for an item to satisfy human needs (e.g. shelter, clothing, food, companionship) or individual wants beyond essential life-support needs.”
Desire
In economics, the ability of a product to satisfy a human want, need, or desire
Utility
The ability of a property or building to be useful and to perform the function for which it is intended according to current market tastes and standards
Functional Utility
The present or anticipated undersupply of an item relative to the demand for it. Conditions of scarcity contribute to value
Scarcity
The ability of an individual or group to participate in a market, i.e., to acquire goods and services with cash or its equivalent.
Effective purchasing power
Value is created by
external market forces
4 main categories of external market forces
Governmental
• Economic
• Social
• Environmental
List of governmental forces
- Planning
- Zoning
- Building Codes
- Environmental restrictions
- Taxes
- Utilities
- Transportation
- Education
- Cultural
- Parks and recreation
- Police
- Fire protection
- Public safety
This agency is charged with monitoring coastal habitats, such as estuaries and reefs. It also monitors development, water and sediment contamination, water diversion for industrial, agricultural, sedimentation, and dredging and filling activities.
NOAA
National Oceanic and atmospheric administration
Their mission is planning, designing, building and operating water resources and other civil works. Wetlands and waterways regulation & permitting
Economic forces are
US Army Corps of Engineers
types of economic external forces
- National economy
- Consumer Price Index
- Interest rates
- Availability of financing
- Wage rates
- Types of employment
- Unemployment rates
- Cost of construction
- Rental rates
- Rental vacancies
- Expense levels
Social influences on property values
Population trends • Population migrations • Ages • Family formations • Lifestyle changes
Environmental influences as external forces
- Shopping
- Schools
- Employment
- Houses of worship
- Cultural facilities
- Recreational facilities
- Educational facilities
- Restaurants
- Police protection
- Fire protection
- Climate
- Topography
- Soil conditions
- Nature of improvements in the area
- Density
- Natural hazards
- Man-made hazards
Taxes would be a(n) _____________ force affecting property values.
Governmental
A grossly over-improved house in a neighborhood is very large and good quality, however no one in the neighborhood can afford to purchase it. This demonstrates a lack of
effective purchasing power
Do Building codes have impact on property values.
yes
Value is influenced by
external market forces
Why would a handful of air typically have no value?
lacks scarcity
An optimal U.S. unemployment rate would be
3-4%
The mortgage meltdown of the late 2000s resulted in
lessened Availability of Financing
The cost of construction is based on three factors. What are they?
Land, labor and materials
Generally, low interest rates encourage _________, while high interest rates encourage __________.
borrowing, saving
