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Explain how the supply of new housing interacts with shifts in the demand for owner-occupied housing in your neighbourhood or an area with which you are familiar. In what ways does the mechanism differ from that which exists normally in markets for consumer goods such as clothing and laptop computers.

You should consider the particular nature of this relationship. What factors determine the derived demand for buildings? What factors will determine its price elasticity? How quickly does supply respond to derived demand? What frictions exist in the supply of new housing? How do these frictions arise and how may they affect the price of housing?

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