In 2013, the market price of houses rose in China but fell in Greece. The Chinese Government tried to reduce the rise in house prices by discouraging borrowing. In Greece, the equilibrium price of houses fell, largely because of a decrease in income. In some countries, governments give subsidies to housebuilders to influence the market for houses.

Mark scheme

Marking points from the official mark scheme (May/June 2015). The mark or mark type is shown in brackets.

1. [2] the price which equates demand and supply
2. [1] market clearing price
3. [1] which ensures no surplus or shortage
4. [1] the price which will not change
5. [1] unless market conditions change
6. [1] a rise in the rate of interest
7. [1] will increase the cost of borrowing
8. [1] a reduction in the availability of loans
9. [1] will make it more difficult to borrow
10. [1] a rise in income
11. [1] may reduce the need to borrow
12. [1] an increase in the state provision of health care/education
13. [1] may mean that people do not have to borrow to cover health care/education expenses
14. [1] a reduction in the price of expensive items e.g. houses, cars
15. [1] may mean that people can buy the items without borrowing
16. [1] a reduction in confidence about the future
17. [1] may mean that people will be afraid they will not be able to repay loans
18. [1] a change in age structure
19. [1] the young may borrow more than those of middle age
20. [1] a change in social attitudes
21. [1] it may become less acceptable to borrow
22. [1] an increase in government subsidies to firms
23. [1] may reduce the need for firms to borrow from banks
24. [1] axes accurately labelled
25. [1] demand and supply curves accurately labelled
26. [1] the shift of the demand curve to the left
27. [1] original and new equilibriums indicated either by lines to the axes or equilibrium prices clearly highlighted
28. [1] a fall in income reduces purchasing power/ability to spend
29. [1] due to lower demand, producers lower price
30. [1] subsidising houses will provide an incentive to build houses
31. [1] increase the supply of houses
32. [1] reduce the price of houses
33. [1] this may make it easier for the poor to buy houses
34. [1] increase the quality of the lives of the poor
35. [1] subsidising houses will increase economic activity
36. [1] to produce more houses would require more labour
37. [1] this would reduce unemployment
38. [1] housing is a necessity
39. [1] so building more houses may reduce poverty/homelessness
40. [1] would involve an opportunity cost
41. [1] government spending could be used on other areas e.g. education/health care
42. [1] may generate external costs
43. [1] for example, pollution and destruction of the natural environment
44. [1] there may be no demand for extra houses
45. [1] in this case there will be an oversupply of houses/inefficient use of resources
46. [1] building firms may become reliant on subsidies
47. [1] and this increase inefficiency