At present, not a day passes where there isn't a media report about the domestic housing/property market. The property market has proved its significance in the context of overall domestic activity, investment and employment. Underpinning this fascination with the property market are some economic imperatives that require examination.
             For the purpose of this assignment the product of choice is a residential house in the Melbourne area. The product is examined from both a macroeconomic and microeconomic perspective. In order to understand basic economic concepts this paper assesses how the determinants of demand and supply for housing are influenced, examines trends in consumption and price and estimate the own price elasticity.
             Housing has enormous economic, social and symbolic significance both for individual Australians and for Governments. It has a special role in the Australian economy:
             · The annual value of dwelling sales in recent years is equivalent to 15%-18% of the value of Gross Domestic Product (GDP)
             · It is a significant component of households wealth, comprising over 60% of total household assets
             · It is the most important item of household expenditure with 26% of the family income currently required to meet the average home loan repayment
             (Real Estate Institute of Australia, March 2003, p 9)
             Over the last 5 years optimism and positive consumer sentiment regarding housing has been high and is reflected in domestic economic activity. This influence on the housing market is reflected through the nation's ongoing GDP growth (ABS Cat No: 5206.0 and employment whilst compensating for the negative impact of the recent downturn in equity markets.
             DETERMINANTS OF DEMAND AND SUPPLY FOR AN ESTABLISHED HOUSE
             Demand and supply determinants are quite prevalent in the case of an established residential house. Typical determinants of demand include household income, taste, number of buye...