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Prices of houses in Australian metropolitan cities, particularly in Darwin, Sydney and Melbourne, are on the rise in the last ten years or so, which is mainly due to surging land prices. It is in this context, answer the following questions:
(a) Why is land price rising in the metropolitan cities? Explain what the major drivers of rising house prices in these cities are, particularly in central business districts (CBDs). Discuss.
(b) Using an appropriate diagram (with appropriately labelled demand and supply curves), explain your answer in part (a) above (i.e., you need to show with the help of a graph as to why land price is rising in metropolitan cities).
(c) Is supply of land perfectly elastic or inelastic in metropolitan cities? Why. Justify your answer with examples.
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