Elasticity of Supply: Why Housing is Unaffordable | Marginal Revolution University
Why are houses and apartments so expensive in some big cities? To an economist, the real question is, “Why is housing supply inelastic in some cities?”Alex Tabarrok explains the definition of elasticity with a simple real-world example. When good jobs are created in a city, more people want to move there–an increase in demand for housing. A supply and demand graph shows that this should lead to a new market equilibrium with a greater quantity of housing sold, at a higher price. But which will increase more, price or quantity?