Lakeville is a small community that completely surrounds a scenic lake up north.Lakeville's zoning regulations require that residential lots have at least one hundred feet of frontage,or shoreline,on the lake.The total shoreline of the lake is 5,000 feet.
Suppose there are currently 50 homes on the lake,each with one hundred feet of shoreline.If demand for lakefront homes increased,
A)there would be excess demand for lakefront homes that the market could not correct.
B)a new equilibrium would be established at a quantity greater than 50 and at a higher price.
C)a new equilibrium would be established at a quantity equal to 50 and at a higher price.
D)no new residents would be able to purchase a home on the lake because all of the lots are taken.

Question

Quizplus · Accepted Answer

Since the demand is high,the price per lot would increase and the quantity supplied would also increase as there is incentive to build more homes.

Lakeville Is a Small Community That Completely Surrounds a Scenic