Question:

5 One reason why the price of houses in cities such as Hong Kong, London, and New York is very
high, is the low price elasticity of supply of houses. Trade unions in some of these cities are
calling for more affordable housing for workers. Governments are also trying to implement various
microeconomic policy measures to reduce the price of houses. In addition, the stability of the
housing market can impact upon the effectiveness of monetary policy.
(a) Identify two monetary policy measures. [2]
(b) Explain two microeconomic policy measures that can be taken by a government to reduce
the price of a product. [4]
(c) Analyse the key determinants of price elasticity of supply of a product. [6]
(d) Discuss whether or not trade unions benefit workers. [8]

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