from 0.5 to 0.9 (De Leeuw 1971). If permanent income elasticity is measured, the results are slightly higher (Kain and Quigley 1975) because transitory income varies from year to year and across individuals, so positive transitory income will tend to cancel out negative transitory income. Many housing economists use permanent income rather than annual income because of the high cost of purchasing real estate. For many people, real estate will be the costliest item they will ever buy. The price of housing is also an important factor. The price elasticity of the demand for housing services in North America is estimated as negative 0.7 by Polinsky and Ellwood (1979), and as negative 0.9 by Maisel, Burnham, and Austin (1971). An individual household's housing demand can be modelled with standard utility/choice theory. A utility function, such as , can be constructed, in which the household's utility is a function of various goods and services (). This will be subject to a budget constraint such as , where is the household's available income and the are the prices for the various goods and services. The equality indicates that the money spent on all the goods and services must be equal to the available income. Because this is unrealistic, the model must be adjusted to allow for borrowing and saving. A measure of wealth, lifetime income, or permanent income is required. The model must also be adjusted to account for the heterogeneity of real estate. This can be done by deconstructing the utility function. If housing services () are separated into its constituent components (), the utility function can be rewritten as . By varying the price of housing services () and solving for points of optimal utility, the household's demand schedule for housing services can be constructed. Market demand is calculated by summing all individual household demands. Supply of housing Developers produce housing supply using land, labour, and various inputs, such as electricity and building materials. The quantity of new supply is determined by the cost of these inputs, the price of the existing stock of houses, and the technology of production. For a typical single-family dwelling in suburban North America, one can assign approximate cost percentages as follows: acquisition costs, 10%; site improvement costs, 11%; labour costs, 26%; materials costs, 31%; finance costs, 3%; administrative costs, 15%; and marketing costs, 4%. Multi-unit residential dwellings typically break down as follows: acquisition costs,