A tract of land is found to contain a plant from which drug companies can extract a newly discovered cancer-fighting medicine. This variety of plant does not grow anywhere else in the world. Initially, the many owners of lots within this trtact, who had not planned to use the land for anything other than its current use as a scenic locale for small vacation homes, announced that they would put all their holdings up for sale to drug companies. Because the land is also home to an endangered lizard species, however, a government agency decides to limit the number of acres in this tract that drug companies can purchase and use for their drug-producing operrations. The government declares that the remaining portion of the land must be left in its current state. What will be the effect of government regulation on the market price of the acreage that is available for extraction of cancer fighting medicine? What will be the effect on the market price of the land that the government declares to be usable only for existing vacation homes?

Answer 1

it will increase, and then decrease