The tightening of government building regulations will act to change the supply conditions within the housing market.

The tighter regulations will cause the market supply curve to shift to the left. This is because the tighter regulations are likely to either increase the costs of building homes, or reduce the availability of space for homes. In either case the profit maximising producer will seek higher returns in other markets. Therefore, fewer homes will be built.

The magnitude of the change in price and quantity will depend on the price elasticity of demand and price elasticity of supply. The more inelastic the PED and PES then the proportionately greater will be the change in price compared to quantity.

The starting level of government building regulations is set neutral. The input parameters can range between tight and loose

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