A study ranks Honolulu number 3 in the world for the most unaffordable housing market in urban locations, behind Los Angeles and San Diego and is deemed “severely unaffordable.” With significant constraints on the supply of land for residential development, housing inflation has resulted.
a. Would the supply of housing in Honolulu be elastic or inelastic?
b. Explain how the elasticity of supply plays an important role in influencing how rapidly housing prices in Honolulu rise.