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Micro Economics Related to Architecture and Engineering

The study of Economics can be broadly classified into two categories:

1. Micro Economics
2. Macro Economics
In this article, we are going to discuss various terms related to Micro Economics.
Check out the brief on Macro Economics and Micro Economics.
Here is the list of terms we are about to discuss in this article:
1. Budget Constraints
2. Choice
3. Demand and Supply
4. Uncertainties
5. Equilibrium
6. Technical constraints
7. Profit maximization
8. Cost minimization
9. Monopoly
10. Oligopoly
11. Production
Budget constraints
For individuals, the budget for acquiring property depends in the earning capacity of the
family per annum, the ability to raise loan, savings, repaying capacity (in 5year/ 10year/
15year loan periods).
Depends on the budgetary capability, savings, willingness to invest, optimum level to
spend, location of the property etc, choice of the specifications, reputation of the builders,
quality of construction, timely completion of projects, proximity to public amenities like
transport, railway station, airport etc.
Demand and supply
Depends on National income, financial status of the family to invest, stability of the job,
location of the place of works, means of transportation.

Supply depends on the builders who are willing to invest in construction to meet the
demand of various economic level of buyers.
Depends on the stability of the elected governments at state/central, cost of living
availability of land at affordable level, building materials, availability of loans at
reasonable rates of interest, skilled and unskilled labour, manpower, government policies,
natural calamities, riots, inflation, global economy as well as national economy,
imports/exports, technical knowhow.
Normally, this factor depends on demand and supply which are interdependent to
maintain perfect equilibrium, policies in five year plans and execution as per scheduled
Technical constraints
Appropriate technology either indigenously developed or acquired from other countries,
availability of technical expertise like architects, planners, engineers, willing efficient
builders, innovative technology to build eco-friendly buildings as appropriate to our
country and global warming is the need of the hour.
Profit maximization and cost minimization
These aspects are to be monitored by governmental agencies or some non-governmental
agencies so that builders do not make too much profit taking advantage of the demand as
it is happening in the building industry.
Building industry comes under ambit of Consumer Protection Act. There should be strict
rules by sanctioning authorities to see that the building is constructed as per sanction and
Monopoly and Oligopoly
In the building industry, there is no monopoly. The only department in central
government, which does not have architects is Ministry of Railways and AP state. They
are managed by engineers only. There is oligopoly in the building industry i.e., there are

reputed builders and reputed producers of building who produce quality building
materials because of intense competition.
The demand for housing is always more than the production either in government sector
or private sector. The production is occasionally affected by inflation, global economic
recession, rising cost of living, over population, scarcity of land in metros and other
Lack of proper mass transportation.
Availability of infrastructure.

Study of Macro Economics

Study of Economics can be divided into two parts:
1. Micro Economics
2. Macro Economics
In this article, we are going to discuss various terms related to Micro Economics.
Check out the brief on Macro Economics and Micro Economics.
Here is the list of terms we are about to discuss in this article:

Demand and supply

Interest rate
Savings and Investments
Monetary Policy
Fiscal Policy

Demand and Supply

At national level, this depends on the government policies. How different building
activities and infrastructure are planned and budgeted. Taxation polices, direct and
indirect tax, allocation of funds for housing for the weaker sections in Five Year plans.
This aspect depends on how effectively the government can control inflation by
exercising control over general price rise and building materials, effective tax collection
both at central and state level, maintaining equilibrium in demand and supply, earning
foreign exchange. The increase in oil prices invariably increase the cost of living in all
walks of life including building industry.
Interest rate
The finance ministry through RBI (Reserved Bank of INDIA) controls the interest rates
over products, personal incomes, including housing loans and building materials.
Now major employment takes place only in private sector. Only an insignificant
percentage of employment takes place in central government and state governments.
Pension schemes have to be discontinued by the governments. The unemployment rate is
very high now either in the underemployment, or employment which is not compatible to
qualifications, and resulted in crime rate to unprecedented level by either educated or
uneducated youth.
Lack of proper education like basic education, education in trades which helps the weaker
Savings and Investments
Government through nationalized banks, financial institutions, public schemes can attract
savings by offering reasonable interest on the public investments.
Monitory system and policies
The monitory systems are controlled by RBI through nationalized banks, LICHFL,
HDFC, HUDCO, which offer housing loans. The overall policies are controlled by
central government and sometimes implemented by state governments.
Fiscal Policies

Some Fiscal policies are controlled by Central Government and some by State
Government by levying taxes like sales tax, excise tax, income tax, import/export duties,
property tax, wealth tax, taxes on investments in fixed deposits if the interest earned is
more than 10,000/ per year, taxation is either directly or indirectly.