You have been asked by your economics professor to graph the market for lumber and then to analyze the change that would occur in equilibrium price as a result of recent forest fires in the west.Your first step would be to

Question

Quizplus · Accepted Answer

Before graphing the market for lumber, we need to determine whether the recent forest fires affected demand or supply. If the fires caused a decrease in the supply of lumber, the supply curve would shift to the left, resulting in a higher equilibrium price. If the fires caused a decrease in demand for lumber (e.g. because people are building fewer houses due to the destruction caused by the fires), the demand curve would shift to the left, resulting in a lower equilibrium price. Only after determining whether the changes affected supply or demand can we accurately graph the market for lumber and determine the impact on equilibrium.

You Have Been Asked by Your Economics Professor to Graph