Suppose a combination of population growth and rising incomes increases both the demand for and the price of housing. In response, existing builders and new entrants construct more new housing. As timber use outstrips the ability of forests to regrow, the price of timber rises. Consequently, the price of new housing rises. This scenario describes a(n)

Question

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This scenario describes an increasing cost industry, where the costs of production rise as the industry expands, in this case due to the rising price of timber, a key input in housing construction.

Suppose a Combination of Population Growth and Rising Incomes Increases