Let D = demand, S = supply, P = equilibrium price, and Q= equilibrium quantity.What happens in the market for tropical hardwood trees if the governments restrict the amount of forest lands that can be logged?
A)D decreases, S no change, P and Q decrease.
B)S decreases, D no change, P increases, Q decreases.
C)D and S decrease, P and Q increase.
D)D no change, S decreases, P increases, Q increases.

Question

Quizplus · Accepted Answer

If the government restricts the amount of forest lands that can be logged, this will decrease the supply of tropical hardwood trees. As a result, the equilibrium price (P) will increase due to a decrease in availability, and the equilibrium quantity (Q) will decrease because of the reduced supply. However, the demand (D) for tropical hardwood trees is not affected by the restriction, so it will remain unchanged. Therefore, the best choice is B.

Let D = Demand, S = Supply, P = Equilibrium