Microeconomics
Housing supply elasticities can help explain why house prices differ across locations. This column uses a rich dataset and a novel identification method to show that US housing supply has become less elastic since the Global Crisis, with bigger declines in places where land-use regulation has tightened most and in areas that had larger price declines during the crisis. This new lower elasticity means US house prices should be more sensitive to changes in demand than before the crisis.
A. When the authors write US house prices should be more sensitive to changes in demand than before the crisis, are they referring to changes in demand due to change in housing prices or due to other factors? Briefly explain.
B. Why would land-use regulations make the housing supply less elastic?
C. Why could the experience of a drop in housing prices during the crisis (the Great Recession) have made the housing supply less elastic? Explain