Jump to content
House Price Crash Forum
Sign in to follow this  
munimula

Quiz

Recommended Posts

Hardly need to be an economics buff to know about Giffen good "theory".

Nothing to do with the housing market whatsoever.

You always live up to your name without fail.

a good which demand increases for yet the price keeps rising - and that's not housing?

Share this post


Link to post
Share on other sites

you want someone to say 'houses' don't you?

Thing is, you don't need a special theory to explain why this happens for houses. They're not just a consumer good, but also an asset, and therefore subject to speculation. Certainly not a Giffen good, anyway.

Share this post


Link to post
Share on other sites

Thing is, you don't need a special theory to explain why this happens for houses. They're not just a consumer good, but also an asset, and therefore subject to speculation. Certainly not a Giffen good, anyway.

I took this from the MoneyWeek article that opened by stating that we may be living with an example of a Giffen good now - housing

As it rightly goes on to say, when something increases in price but demand doesn't drop then people are foregoing other things. This is stating the obvious, housing costs are now taking up more and more income, other rising costs are doing the same. So what are people foregoing when they spend so much on housing costs?

Share this post


Link to post
Share on other sites

I took this from the MoneyWeek article that opened by stating that we may be living with an example of a Giffen good now - housing

As it rightly goes on to say, when something increases in price but demand doesn't drop then people are foregoing other things. This is stating the obvious, housing costs are now taking up more and more income, other rising costs are doing the same. So what are people foregoing when they spend so much on housing costs?

I still don't think it's a Giffen good though (in fact, economists have found it hard to find ANY real Giffen goods)

The classic Giffen good is bread for VERY poor people, where there are few substitute staple foodstuffs.

So their diet is mainly bread, with some more expensive foods such as meat.

If the price of bread increases, they still have to buy it, as there is no alternative. But this leaves them less money for the alternatives, so they end up buying more bread.

This clearly doesn't apply to housing. It isn't an inferior good, and there is a clear substitute for people who find the price of housing goes up - rent instead.

You don't end up buying more housing after it's price goes up because it's all you can afford to do. You buy more housing after it's price goes up because you're a greedy b*****d who expects to make speculative gains for very little effort.

Share this post


Link to post
Share on other sites

You always live up to your name without fail.

a good which demand increases for yet the price keeps rising - and that's not housing?

When you draw the demand curve for a good you must always add "ceteris paribus" at the bottom otherwise the professor will not mark your work correct.

What we are talking about here is not ceteris paribus nor a demand curve: a time axis is being added to the usual P/Q axes. Further, we are not talking about a quantity of identical goods either.

If you plot the usual demand curve for a population of identical houses at a given time, then demand will indeed fall with increasing price and so a house is not a Giffen good.

Share this post


Link to post
Share on other sites

Perhaps you're referring to a Veblen good... :ph34r:

Good spot! Also correct, but again not really applicable to housing.

Veblen goods are luxury goods where consumer perception of the product and preferences for it shifts as the price increases.

So bling products where the price tag rather than the quality is the main attraction might qualify but housing doesn't.

Share this post


Link to post
Share on other sites

I took this from the MoneyWeek article that opened by stating that we may be living with an example of a Giffen good now - housing

As it rightly goes on to say, when something increases in price but demand doesn't drop then people are foregoing other things. This is stating the obvious, housing costs are now taking up more and more income, other rising costs are doing the same. So what are people foregoing when they spend so much on housing costs?

Not heroin anyway (another giffen good)

Share this post


Link to post
Share on other sites
Guest Charlie The Tramp

So what are people foregoing when they spend so much on housing costs?

Visits to the Optician and Dentist? :rolleyes:

Share this post


Link to post
Share on other sites

Q. What name is given to a good when the demand for it increases despite a price rise?

A. Stella Artois - reassuringly expensive!

( well, according to their ad agency :P )

Share this post


Link to post
Share on other sites

Q. What name is given to a good when the demand for it increases despite a price rise?

A. ?

Why can't you ask an easier question?. Like:

Q. What colour is a red fire engine?

Share this post


Link to post
Share on other sites

Q. What name is given to a good when the demand for it increases despite a price rise?

A. ?

I would have said housing 3 years ago.

Now I would say that the demand for housing can be measured twice

1: For purpose = Dropping Demand (more houses per head of capita)

2: For investment.

Now demand in a speculative market rises because of Price Rises.

(Hmnn houses are going up, if I buy one it will go up, I can sell it for more)

This is the housing market, a speculative market otherwise known as a "Greater Fool" market.

What you talk about in that demand will go up in spite of price rises is not really a valid question.

You always live up to your name without fail.

a good which demand increases for yet the price keeps rising - and that's not housing?

On all that is holy.

The housing market has been a speculative market for decades and has boom and bust for decades.

Everyone on here knows so many people all claiming "As prices go up, houses are a great investment, if I buy one it will go up"

It is the most obvious speculative market that anyone has seen.

Now I know that the economic cycle can only exist whilst educated people continue to be surprised by it each time.

But there has to be a limit to how blind people can be.

To claim that it is not speculation is your choice.

It is laughable.

But your choice… Like a smoker coughing down his super king claiming that he is not convinced by the medical evidence..

That is their choice

Speculative please, of course its speculative.

Or.

"Through out time there has been housing, but it is only now with the improvements in education and the evolution of the human brain that we have finally realised that no one has bee paying enough for them before"

"Everyone wants to live alone"

Speculation,,,,,,,, It's all anyone is doing.. A child can see it.

Share this post


Link to post
Share on other sites

You always live up to your name without fail.

So, given the posts following your little tantrum, would you like to issue an apology?

Surely everyone knows that my Nom de Plume is a reversal of the great anarchist Steve Ignorant.

He, like me, had incredible presence of mind and predicted decades ago what was going to happen to society.

He couldn't communicate, of course, which is why I rather like him.

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 336 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.