Microeconomics assignment.....

The article shows the action of homeowners might take if the interest rate is being cut. Which can be relate to the, Law Of Demand; other things remaining the same, the higher the price of a good, the smaller is the quantity demanded; the lower the price of a good, the larger is the quantity demanded. Another law that can be include is the, Law Of Supply, states that; other things remaining the same, the higher the price of a good, the greater is the quantity supplied; and the lower the price of a good, the smaller is the quantity supplied. The reason why it can be related to these two laws is because the homeowners or customer acts as a demand and the bankers’ acts as a supplier.

As stated in the article, the property prices have dropped by between 10% and 15% since late last year. This event has made a drastic change in the equilibrium state. When equilibrium price decreases, the quantity/supply would increase but the changes in the price and quantity/supply does not affect the equilibrium status. Therefore, it still remains in the equilibrium state, only with a lower equilibrium price and higher quantity/supply.

Subsequent effects of the events are all possible changes in demand and supply. A change demand or supply on both demand and supply changes the equilibrium price and the equilibrium quantity. According to the article, “When the price fetched as high as it did last year, prices of oil and raw materials were escalating; but as land area in KLCC is scarce, its property prices won’t go down as much”. This passage clearly shows the substitute good for demand. As for the complement good, it is stated in the article that, “In some ways, the decline in the property market helps to stabilise rental rates for some developments, such as the luxury condominium units located in the Kuala Lumpur City Centre (KLCC) vicinity.” The decline of property market has acts as a complement to help stabilise the rental rates that used to be high.

The strategies adopted by companies and government to mitigate the effects on demand or supply can be seen when the prices of oil and raw materials rises. It a technique used by the companies and government to make sure there won’t be any big changes in the overall economy. So that the property prices won’t go down too much.

By adjusting the price and quantity/supply, it would have given the graph a whole new equilibrium point. This would adjust the price mechanism. This is due to the dropped of the property prices late last year by 10% to 15%.

P.S. Does anyone understand the whole essay???? Because i don't get a SINGLE THING! And i am the one that writes it!