What is the new rate of home construction per year?

The price of homes affects the number of new homes built—the higher the price rises, the more new homes are built. Economic literature suggests that a reasonable value for the price elasticity of supply for home construction is 3, so a 1 percent price increase generates a 3 percent increase in new home construction.  a) Suppose the average price of homes in a town is $300,000, and 200 new homes are constructed in the town each year. Now suppose the average price of homes goes up to $330,000. What is the new rate of home construction per year? b) Instead of rising, suppose the average price of homes in the town falls from $300,000 to $270,000. What is the new rate of home construction per year?

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