Using the tools of demand and supply analyse

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You act as an advisor to the Treasury and your economics team estimates that the demand for financial capital is highly elastic with respect of the price of capital as shown by the AT curve in the graph below, while the demand for housing is highly inelastic with respect to the house prices as shown by the curve BT

The supply curves for capital and housing are identical and show by the horizontal line PEE
The government sets a tax rate at PEPT in order to to raise a given tax revenue and asks your recommendation.
Would you levy a tax on capital transactions or on house sales? Justify your answer

Using the tools of demand and supply analyse how the move of the University of Ulster from Jordanstown to the Belfast City Centre to affect
• House rentals in Belfast
• House prices in Jordanstown
• Belfast taxi fares

Reference no: EM132926991

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