Why must the cost of living be so high in NYC?
Price Elasticity of Supply:
Price elasticity of supply is a measure of how responsive the quantity supplied is to a change in the price. The higher the elasticity, the more responsive is the quantity supplied.
Answer and Explanation:
In New York City, there is very limited space to build new housing. Because of this, the price elasticity of supply is very inelastic. Additionally, over time demand for housing in NYC has increased because of a growing preference to rise in the city. Therefore, because the supply is highly inelastic, as the demand has increased, there has been a strong increase in the price, but only a small increase in the equilibrium quantity.
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Learn more about this topic:
from Economics 101: Principles of MicroeconomicsChapter 2 / Lesson 14