Depends what the situation is, if the rents are absurdly high where you can undercut them and still profit then of course they would rather build more. If they are getting close to cost price, developers won't build more to lower it beyond that. At that point if you want to lower prices more you'd have to look at lowering the cost of construction.

Developers usually want to buy land, build house/apartment, and sell house/apartment.

They want to flow as much as possible - so if there are unlimited building spots you get a smattering of various options being built as they all find there niche.

If the building lots are rare, then they all will be built into the most expensive possibility.