Regulations and the Price of Housing. Suppose local building regulations increase the cost of building new houses, decreasing supply by 12 percent. The initial price of new housing is $200,000, the...

Regulations and the Price of Housing. Suppose local building regulations increase the cost of building new houses, decreasing supply by 12 percent. The initial price of new housing is $200,000, the price elasticity of demand is 1.0, and the price elasticity of supply is 3.0. Predict the effect of the regulations on the equilibrium price of new housing. Illustrate your answer with a graph that shows the initial point (a) and the new equilibrium (b). (Related to Application 4 on page 447.)