Micro Economics | Economics Related to Building Industry

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 programs.

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 specifications.

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 cities.

Lack of proper mass transportation.

Availability of infrastructure.

We will be discussing “Terms in Macro Economics” in our successive articles…

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