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In city A, restrictions on industrial imports keep the price of industrial products at about 10...

In city A, restrictions on industrial imports keep the price of industrial products at about 10 times the national level. Now the government decides to remove all import restrictions on industrial products. What impact do you think removing these import restrictions would have on the price of housing in city A? Explain.

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Answer #1

With the removal of import restriction, the price of industrial products will fall because now industrial manufacturer will face competition from foreign and also the price within the country is higher and therefore, people will import at lower world prices. Due to this, the supply of housing will rise beccause house builder will now get raw material to build house at less cost. Therefore, the supply of housing in City A will rise and the price of housing will fall.

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