7. Some years ago, legislators in a state claimed that speculation on land was driving prices to too high a level. They proposed to pass a law that would require the buyer of any piece of land in the state to hold the land for at least three years before he or she could resell it.

a. Analyze this proposal in terms of perfect markets and possible frictions that have been described in this chapter.

b. If that proposal had passed, do you think land prices would have risen or fallen?