A town has a rapidly growing population, but there are no longer any vacant lots around the lake to build more houses. In this case, it is likely that the price of existing homes on the lake

A town has a rapidly growing population, but there are no longer any vacant lots around the lake to build more houses. In this case, it is likely that the price of existing homes on the lake

• A. will increase
• B. will decrease
• C. will stay the same
• D. will fluctuate unpredictably

Answer: (A)

Scarcity of developable land combined with rising demand drives prices up. When the population grows but there’s no new lakefront land to build on, the supply of lakefront homes is effectively fixed while buyers compete for these limited homes. That competition pushes prices higher, so existing lakefront properties become more valuable. If demand softened or new lots became available, prices might level off or fall, but with constrained supply and increasing demand, the trend is upward. A decrease or no change would require opposite forces, and unpredictable fluctuations don’t align with the clear impact of scarcity plus growth.

Scarcity of developable land combined with rising demand drives prices up. When the population grows but there’s no new lakefront land to build on, the supply of lakefront homes is effectively fixed while buyers compete for these limited homes. That competition pushes prices higher, so existing lakefront properties become more valuable. If demand softened or new lots became available, prices might level off or fall, but with constrained supply and increasing demand, the trend is upward. A decrease or no change would require opposite forces, and unpredictable fluctuations don’t align with the clear impact of scarcity plus growth.