Chapter 2 - The Operation of a Market

“Houses starts to move lower in 2007:CMHC”
Source: http://www.canada.com/, November 2, 2006

The article’s main idea is about how the demand for houses is going to slow down, even in Alberta and BC, and therefore the constructions of houses in Canada is going to decrease in the next year. It is expected that the demand for houses will continue to decrease over the rest of the decade. The Canada Mortgage Housing Corporation predicted that Manitoba will be the only province where construction is expected to increase from 2008-2010. This year, BC and Alberta will boost the average selling price of a home up 11.5% in 2005 to $278,100. However, it is expected that next year, the increase in prices will only be half of this year’s increase. Increase in homes for sale combined with slower sales will balance the housing market.


Relation to Chapter 2 – The market of houses, supply and demand and elasticity


Due to the high demands of home ownership, in the past, the market was able to raise their prices. The demand of home ownership was represented by the limited quantity of housing. In a response to the popular demand the housing market began to flourish. As the demand for houses increased, the price of houses also increased. The low mortgage rates, or the complementary product, increases in population and the taste in preferences were the result of the record sales in new and existing hones.


However now, it seems as though, people realize that they are not able to purchase the houses anymore because of the price increases. This is when people start considering the alternatives or substitutes to houses such as apartments, condos, townhouses, duplexes and rentals, and therefore houses are elastic. I believe that as time wares off, the increase in supply of houses with the struggle to sell at high prices will bring more of a balance to the housing market or, in other words, back to an equilibrium price where it is considered to be affordable.

In my opinion, I believe that only time will tell if the prices of the housing market will fluctuate or not. As more and more substitutes of houses are available, people may adjust their buying patterns especially if there are changes in the price of substitute products. Since apartments, townhouses, etcetera are close substitutes for houses, the increase in price of homes will likely influence the demand for the substitutes.

Chapter 1 – Introductory Concepts

“Western job boom drops unemployment”
Cnews, November 4, 2006

This article explains how Canada’s unemployment slipped to 6.2% for October compared to last months 6.4% due to the growth of western Canadian oil, gas and minerals boom. The economy recorded a net gain of 51,000 jobs, 23,000 of them in Alberta alone for the month of October. The increase was twice of what analysts had predicted. While the West is prospering from the energy and mineral sectors, manufacturing, especially in Ontario and Quebec, are continuing to weaken. The high dollar and slumping markets led to cuts in the automotive, industrial and forestry industries. In a result, 15,000 factory job workers were laid off, making the total losses for the year to 83,000. However, Ontario and Quebec are still able to sustain their economy by finding new jobs in service industries. “The most important part of these figures is that the Canadian economy continues to create jobs, although it is an uneven performance across sectors and across provinces,” said Aron Gampel.


Relation to Chapter 1 – Scarcity, labour and land (resources)


It appears that the amounts of labour resources are be coming quite scarce in Western Canada. Consequently, the reason for Western Canada’s economic boom is greatly from the abundance and demand of their land resources (oil, gas, minerals). As more and more land resources are used, the nearer the resources will deplete and become scarce.


However, we must consider what does the future hold for Western provinces when the non-renewable resources are gone? What happens if Western Canada loses the demand of their resources? It is likely that as land resources run out, the amount of labour opportunities will decrease in Western Canada, especially in the energy, mineral, manufacturing industries. This is why us, Western Canadians, should really consider other ways for our economy to prosper instead of constantly selling our scarce resources. We need to find new ways to sustain our economy by finding new jobs in other industries, perhaps in services. In other words, in the near future, the amount of Western jobs available may decrease as our major dependent of non-renewable resources depreciate. If this occurs, Western Canadians may consider moving to prosperous countries that demand workers just as how Western Canada once did.


Therefore, in my opinion, I fully agree that economics is the study of how we make decisions regarding the use of our scare resources. As resources gradually become scarce, Western Canada’s future economy still remains a huge question mark that must be considered before it’s too little, too late. It may be possible that in the upcoming years that Alberta and British Columbia may experience a slumping economy just like Eastern Canada.