A headline reads "Lumber Prices Up Sharply." In a competitive market, this situation would lead to a(n):

Question

Quizplus · Accepted Answer

When the price of lumber goes up, the cost of building a new home also goes up. This increase in cost will lead to an increase in the price of new homes. However, because the increase in price may lead some potential buyers to opt out of purchasing a new home, the quantity of new homes may decrease. This result is consistent with the law of supply and demand: as the price of a good or service increases, the quantity demanded tends to decrease.

A Headline Reads "Lumber Prices Up Sharply