II. Both the private sector and the public sector are involved in building houses. In one country a private firm has built an extra 100 000 houses but, at the same time, its government has increased income tax significantly.
(a) Explain, using a demand and supply diagram, how these two actions would have affected the equilibrium price and the equilibrium quantity of houses. [6]
(b) Explain what determines the demand for houses. [4]
