British Construction Activity Falls Construction activity in Britain declined in June at the fastest rate in 11 years. A major home builder was unable to raise more capital—both signs of worsening conditions in the battered housing industry. Employment of construction labor declined in June after 23 months of growth. Average house prices fell 0.9 percent in June, the eighth consecutive month of declines, leaving the average 6.3 percent below June 2007.

Source: Forbes, July 2, 2008

a. Explain how a fall in house prices influences the market for construction labor.

b. On a graph illustrate the effect of falling house prices in the market for construction labor.