Your company is a developer of luxury detached and semi-detached homes who operate predominantly in and around Edinburgh.
You have recently acquired a five acre site in what is considered to be a good location for residential properties in the area with excellent commuter links.
Part 1 (40%)
With reference to the concepts of price elasticity of demand and income elasticity of demand discuss the factors which will influence:
a) when you should start developing the site, and
b) the level of specification of the properties to be developed
Part 2 (15%)
A rival developer has been granted planning permission for the re-development of luxury apartments in a nearby site. With reference to the principles of cross-price elasticity of demand, explain how this may influence your pricing strategy.
Part 3 (45%)
The Government has decided to push through legislation and adopt redistributive policies which it believes will make Scotland a much \’fairer\’ society. These include:
a) introducing an increase in the minimum wage to 9 per hour
b) raise income tax at the highest level to 60%
c) require that, in relation to consent given to new construction projects, one in every twenty employees must be recruited from the long term unemployed
Discuss how these initiatives may impact on your operations.