• Identify and explain the factors that affect the level of demand and hence the turnover for a company operating in the construction industry. In your answer you should consider the possible importance of the concept of “elasticity of demand”.

The demand means total amount of goods ans services of certain quality ans variety which is available for certain amount of money. Alfred Marshall saw demand as a functional relationship between the amount of goods and services and it's prices. "The bigger amounts of goods someone have been offered on the market, under the same conditions (value of money and the amount of money) results in lower bottom price he would be looking for those goods, meaning, his lower price limit falls down." In order to analyze demand, one must keep in mind five basic elements which shape it's intensity, and they are: quantity of goods on the market, quality, variety and available funds. Without full analysis of these elements, one can not understand, comprehend and discuss demand itself.

Whether it will be larger or smaller amount of goods and services sold and bought on the market, depends on numerous factors which influence market economy, and they form a synthesis with relations between offer and demand. Among the most important factors we can include: 1) market prices; 2) the amount of goods offered on the market; 3) consumer needs and demands; 4) consumer desires and habits; 5) income- available funds; 6) further expectations consumers have about future production and prices of specific goods and services; 8) expectations about future social and personal needs; 9) age; 10) consumer's social environment and 11) consumer's social level.

Offer and demand are not constant, they are flexible, and the result of their synergy has a high influence on market prices. If, for example, offer and demand for certain good or service match, the goods and services will be sold for it's real price, or, the price of production. In that case, it is a balanced price, which provides optimal ratio between price and goods for both, consumers and manufacturers. In cases when offer and demand do not mach, goods will be sold on market prices, which can be higher or lower depending on their relationship. In other words, increasing offer causes lower prices, and increasing demand causes higher prices, higher than the real value of the goods and services.
















• Which type of market structure that is identified in micro-economic theory most closely describes the competition conditions in the construction industry in the UK? Justify your answer.


In order to answer this question, I need to clarify the market itself. What is the market?

Market is the battle field on which there is a non stop battle going on between offer and demand. It is the daily outcome of this battle on which the economy of the country depends on. Market is a synonym for the order, and the brain that rules that complex body is stock exchange market. Different markets merge from activities of different units – businesses and companies, whose aim not towards maintaining order, but towards fulfilling their own, personal interests, by all means possible. Every unit works for itself. Co-relations between similar units create structure, and it influences all the units, by creating limits and rules of behavior. Once fully created, the market has it's own life, rules and strength.


The type of market structure that is identified in micro-economic theory, which most closely describes the competition conditions in the construction industry in the UK today is the dominant company- company which dominates the market. Dominant company is the one that covers over 40 % of the market, like Balfour Betty plc, which holds the leading position in 10 different markets in UK and has no real competition.
How does the Balfour Beatty plc dominate it's markets?
• They deliver accommodation solutions for UK and US army and military forces.
• They hold the monopoly in health care construction deals in UK and US
• Via government they are key supplier of education markets
• They are leading road constructors, not only in UK, but also in US and Dubai.
• They provide facilities and asset management for customers in UK
• They are the leading fixed rail infrastructure constructors and they operate in over 20 countries in this moment.
• They design, build and maintain airports, and have a huge success in Hong Kong, Dubai, UK and US
• Water-they work with customers all over the world, especially in UK, US and Hohg Kong
• Power transmission and distribution networks supplied by Balfour Beatty plc covers around 10% of UK.
• They provide full commercial building service, for small, local business places through to complex projects. UK, US, Dubai, Hong Kong, Singapore....
This short list mentioned above, creates a bigger picture, and it shows how exactly this giant dominates every market in UK, but also, beginning to dominate markets all over the world.








• In the face of an economic recession in the economic cycle, explain the possible policy actions that a government may take to try to bring about an upturn of activity within the macro-economy to enhance the recovery stage of the cycle which will inevitably follow. You should identify the relevant aspects of economic theory that support any policy approach you suggest. Why are the outcomes of such policies are often to predict with any accuracy?


World wide globalization lead to huge transfers of capital between countries, multinational companies and financial institutions, and that is how the financial crisis spread so quickly and easily among countries, shaking down all the world's economies. First, it stroked the countries with similar mortgage systems, like UK and certain Asian countries, but is rapidly overwhelmed stock exchange markets, which lead to serious fall of stock value. Stock market panic was immediately replaced by bankers panic, with deposit withdrawal and rising interest rates. Problem which occurred in one market sector of one country grew up to be a global problem in just a few months.

In global financial system, national borders do not exist, so the crisis could not be isolated within the borders of USA economy, and it spread all over the world. On USA financial market, there are, side by side with local, American businesses and companies, world's biggest companies, corporations, banks and trust funds from all over the world, including European Union. As the analysists predicted, this crisis had a great influence on construction industry in UK, but, no one predicted this influence will be this devastating.

Actual crisis caused shortage of available funds, credits, increased the interest rates, wiped out almost all investment plans and development plans and most certainly did not have a stimulating effect on total investment portfolio in the world. Total investments consist of individual investments, public, governmental and other investments. Interest rates and credit conditions dictate the process of decision making in every company. Every decision, concerning development plans, stock amounts, new production lines etc., depend on current conditions on the financial markets. If loans are hard to get, or hard to pay back, they will most certainly give up their investment and development plans until these conditions become more favorable. It is the same with public and government companies, narrowing of finances causes narrowing of activities, as simple as that.

World wide decrease in demand, shortage of investments, disables construction industry to develop and causes severe recession which leads to further expanding of the crisis! Less activity on construction market, can increase unemployment, and it i new burden on the government. Almost half of the companies, involved in construction market, according to some analysists, can have serious financial problems because of this.

How can a country solve the problems construction industry has? There are several possibilities and option for government intervention. The most extreme is for the country itself to become investor, to invest in or even to fully finance complex projects, but it can cause turbulence on the market and that idea is not a good one. If that, it would be possible for the government to finance construction projects only in cities and towns where companies have no interest in investing, and there is an existing demand. It would take much less to provide cheap and easy to get credits for the companies and citizens, which would probably increase demand and action on the market.
If loans are easy to get, it can expand economic activities. They can stimulate total investment portfolio, which, finally, leads to increase of total production, GDP and employment.

Providing benefits for investors by offering them low interest rates for construction projects. If offered a low cost funds, investors would be able to lower the price of square feet and it would eventually lead to higher interest of citizens and companies for purchase. If the government could provide lower prices for land, it would create domino effect and bring down the prices per square feet, and it is the engine that can put the whole construction market in action.

It takes government measures to help the construction industry and market to recover, and it is the base for the recovery of the whole macro-economy. Measures, concerning taxes, prices that can be dictates by government (such as a price of land, for example), tax benefits for construction investments home and abroad can be stimulative and provide the necessary "fuel" for the "engine" of construction market.



When the crisis occurred, first analysis pointed towards the construction industry as the most vulnerable one, and it was expected. But, the main problem in UK is not about shortage of investments, but almost non existing demand. Our citizens show no interest in purchasing apartments, they show no interest in construction loans, simply because there is a general atmosphere of uncertainty for the future. Banks increased interest rates, construction industry did not lower prices, people fell insecure about their jobs and financial future and have no intention to invest or take any loans under these conditions.