Long-run supply expansion from housing subsidy

Steps:

• Subsidy to buyers shifts demand curve rightward, increasing quantity demanded at each price.
• Short-run fixed supply (S1) leads to higher price and modest quantity increase.
• Long run allows new supply (S2) as agricultural land converts to housing, shifting supply right.
• Equilibrium reaches higher quantity with moderated price rise due to elastic long-run supply.

Why D is correct:

• D depicts rightward supply shift to S2, aligning with long-run adjustment where fixed inputs like land become variable per supply elasticity definition.

Why the others are wrong:

• A shows only demand shift on fixed S1, which is short-run effect.
• B incorrectly shifts supply left, ignoring expansion incentive.
• C shifts demand further without supply response, overstating short-run impact.

Final answer: D