1.Covid has caused many people from cities to move out, driving demand increases for housing in areas surrounding big cities.Realtor.com reports that prices for existing houses have increased 10% over the last 6 months.Let's assume that the initial price level for housing was 100, and that the 10% increase has driven the price to 110.Assume that the price elasticity of supply was 0 in the very short run (the past 6 months).

a.Based on empirical estimates of the short run and long run price elasticities of supply of housing (Google it, include your sources in your answer), what will be the long effect on the total number of houses constructed (you will need quantities of houses being built, Google it). (5)

a.Based on the information given in the question, and the information you have found for part a), estimate what will be the final effect on the long run price of housing? (5)