MPE781

Question 1: (8 marks)
In your own words, summarize the article, “Australian Housing Market Report,” Prepared for National Australia Bank Ltd, by RP Data (November 2014). In particular, what are the main messages of the article?
Question 2: (8 marks)
Using appropriate diagrams, figures and data to answer: Are the Melbourne’s housing prices
overheated? Why or why not?
Question 3: (8 marks)
Suppose that the Melbourne’s housing market is perfectly competitive (i.e., many real estate developers). The city government decides to levy a buyer’s tax (specific tax) on housing purchases.
Using appropriate diagrams to answer:
(a). Examine the impacts of this buyer’s tax on the equilibrium housing prices, consumer surplus,
producer surplus, and total surplus (or social welfare).
(b). Can an increase in the buyer’s tax raise social welfare?
(c). Can an increase in the buyer’s tax raise city government’s tax revenue?
Question 4: (8 marks)
Suppose that city government decides to develop a new housing area (i.e., the city government is like a monopolist).
Using appropriate diagrams to answer:
(a) If the city government’s objective is to maximize profits, what would be the housing price
set in this new area?
(b) If the city government’s objective is to maximize revenue, what would be the housing price set in this new area?
(c) If the city government’s objective is to maximize welfare, what would be the housing price set in this new area?
Question 5: (8 marks)
Find at least three countries or economies that have housing policies or measures to stabilize the
housing markets.
Provide your views or suggestions on the best measure to stabilize the housing markets that could be considered or used in Melbourne.