Question

Suppose there is a decrease in the supply of lumber. What would we expect to happen to the equilibrium price and quantity of lumber?

Answer 1

Answer:

Price will rise and quantity will fall.

Explanation:

The supply and demand model describes the interaction in the market of a particular good between consumers and producers, in relation to the price and sales of that good. It is the fundamental model of microeconomics, and is also used to explain a wide variety of macroeconomic scenarios.

It states that, in a free and competitive market, the price is determined based on the request for goods and services by consumers and the amount provided by the producers, generating a balance point at which consumers will be willing to acquire everything that producers offer at the price marked by that point, and producers are willing to deliver the levels of production that consumers require, establishing and maintaining a balance point.

Therefore, since there is a lower supply of the product, it may not be enough to meet the total demand and, therefore, if it is more required, increase the price and decrease the quantity.