The Town of Lookout Mountain, Georgia, had a lot of undeveloped land and became a favorite spot for developers to build subdivisions. In response, the town council voted to restrict building of new houses to lots of one acre or more. Previously, developers had been able to build several houses on an acre.
What effect would this new law have on the price per acre of available land in that municipality?
What effect would this new law have on the price of new houses in that town?
What about the price of existing houses in Lookout Mountain? Explain your answer.