Suppose you wish to analyze the change in the equilibrium price of lumber as a result of forest fires in the West.What would your first step be?

Question

Quizplus · Accepted Answer

Before analyzing the change in equilibrium price, it is important to determine whether the forest fires affect the supply or demand of lumber. If the fires impact the supply, it would shift the supply curve to the left, resulting in a higher equilibrium price. On the other hand, if the fires impact the demand, it would shift the demand curve to the left, resulting in a lower equilibrium price. Hence, the first step would be to decide whether the fires shift demand or supply.

Suppose You Wish to Analyze the Change in the Equilibrium