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builders would always prefer to build more and sell more, if a home costs me 200k to build and it currently sells for 500k but current regulations only allow me to build 100 of them then that's $3m profit (actual margins aren't this high).

if a law comes along that suddenly gives me the power to build 200 but the asking price drops to 400k i'd rather build 200 homes and net $4m

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All things being equal, companies want to sell as little as possible for as much as possible. We all want to make the most amount of money with the least amount of work.

You also need to factor in the time it takes to build a home. If I can build 100 homes a year I'd rather take $3m profit each year than build the cheaper homes for $2m profit. Sure, if I can scale up infinitely, then I'll go ahead and build infinite homes for infinite profit. But in the real world there is significant risk in scaling up. If I build too many homes and the prices go down, then I'm now hurting my own profits. It can be better for me to do the lower effort thing and build less for a higher profit margin.

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