If land becomes more valuable in residential use than in commercial use,
A) the supply of land available for commercial use should decrease and the supply of land for residential use should increase.
B) there can be no change in the allocation of land because land is fixed in supply.
C) there will be no change in the allocation of land, as there is no responsiveness to price changes by suppliers of land.
D) the supply of land for commercial use will become perfectly elastic, and the supply of land for residential use will become perfectly inelastic.

Question

Quizplus · Accepted Answer

When land becomes more valuable in residential use than in commercial use, owners are incentivized to convert their land to residential use to maximize its value. This leads to an increase in the supply of land for residential purposes and a decrease in the supply for commercial purposes, as landowners respond to the change in relative profitability. Choices B, C, and D do not accurately reflect how the market for land typically responds to changes in value between different uses.

If Land Becomes More Valuable in Residential Use Than in Commercial