Increases in population in an area followed by increases in home building activity are examples of which principle?

The principle that best explains the relationship between increases in population and corresponding increases in home building activity is supply and demand. This economic principle illustrates how the demand for housing rises as more people move into an area, which prompts builders to increase home construction to meet that demand.

When the population increases, the demand for housing typically grows, leading to a heightened need for residential units. In response to this demand, builders are incentivized to construct more homes, thereby increasing the supply of housing to balance the market. This dynamic interaction is a classic example of how supply and demand affect market conditions; as demand outstrips supply, home builders react by developing more properties to accommodate the needs of the growing population.

Understanding this principle is crucial for appraisers and assessors, as it helps them analyze market trends and property values based on demographic changes and construction activity within communities.