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In the analysis of limits on building permits illustrated by Figure 9–5 , the price of housing increases while the price of land decreases. In other words, housing and land prices change in opposite directions. a. Housing and land prices change in opposite directions because the policy _____ in the housing market and ______ in the land market. Illustrate with two graphs, one for each market. b. Recall the leftover principle: Land rent = total revenue - nonland cost. If 80 permits are handed out free of charge and can be resold, the changes in prices are consistent with the leftover principle because . . .
Chapter 9, Problem 7(choose chapter or problem)
Permit and Leftover Principle
In the analysis of limits on building permits illustrated by Figure 9–5 , the price of housing increases while the price of land decreases. In other words, housing and land prices change in opposite directions.
(a). Housing and land prices change in opposite directions because the policy _____ in the housing market and _____ in the land market. Illustrate with two graphs, one for each market.
(b). Recall the leftover principle: Land rent = total revenue - nonland cost. If 80 permits are handed out free of charge and can be resold, the changes in prices are consistent with the leftover principle because...
Questions & Answers
QUESTION:
Permit and Leftover Principle
In the analysis of limits on building permits illustrated by Figure 9–5 , the price of housing increases while the price of land decreases. In other words, housing and land prices change in opposite directions.
(a). Housing and land prices change in opposite directions because the policy _____ in the housing market and _____ in the land market. Illustrate with two graphs, one for each market.
(b). Recall the leftover principle: Land rent = total revenue - nonland cost. If 80 permits are handed out free of charge and can be resold, the changes in prices are consistent with the leftover principle because...
ANSWER:Step 1 of 5
Given:- The price of housing increases while the price of land decreases. In other words, housing and land prices change in opposite directions.
In an unregulated housing market, supply and demand factors drive up housing costs. However, before building dwellings, construction companies must obtain permission. The gap between the housing price and its marginal cost reflects the firm's willingness to pay for each permit if the number of permits is restricted or controlled by legislation.