Suppose you wish to analyze the change in the equilibrium price of lumber as a result of pine beetle infestations that are destroying trees in the West. What would your first step be?

Question

Quizplus · Accepted Answer

The first step would be to determine whether the pine beetle infestations are affecting the supply or demand of lumber. If the infestations are reducing the supply of lumber, then it would be a shift in the supply curve, leading to a higher equilibrium price. If the infestations are reducing the demand for lumber, then it would be a shift in the demand curve, leading to a lower equilibrium price. Therefore, the first step would be to determine whether the infestations are shifting the supply or demand curve.

Suppose You Wish to Analyze the Change in the Equilibrium