Let D = demand,S = supply,P = equilibrium price,Q = equilibrium quantity.What happens in the market for tropical hardwood trees if the government restricts 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, the supply of tropical hardwood trees decreases, causing a shift to the left in the supply curve. This results in a higher equilibrium price (P) and a lower equilibrium quantity (Q). The demand for tropical hardwood trees is unlikely to be affected by the regulation, so there is no shift in the demand curve. Therefore, the best choice is B, which describes a decrease in supply (S), increase in price (P), and decrease in quantity (Q) without any change in demand (D).

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