Question

The following appeared in a Florida newspaper a week after a hurricane hit the state.​ "Floridians are relieved that the storm produced no fatalities but homeowners face​ weeks, if not​ months, of rebuilding. Matters are made worse by the soaring prices of plywood and other building materials that always follow in a​ hurricane's path. Complaints of profiteering and price gouging have not deterred firms from raising their prices by over 100​ percent." Which of the following offers the best explanation for the price increases referred to in the​ article?
A. The hurricane caused an increase in the demand for building materials.
B. There was a reduction in supply as firms shipped plywood and other materials to locations not affected by the storm.
C. The hurricane created an artificial shortage of building materials.
D. The hurricane reduced the number of suppliers of building materials.

Answer 1

Answer:

The correct answer is option A.

Explanation:

A hurricane that hit Florida has destroyed homes. The rebuilding process will take weeks and months. The price of building materials has increased as well. This increase in price is because of increased demand for building materials.

The demand curve for building materials has moved to the right. This has led to an increase in the price of building materials. The firms are taking advantage of this increase in demand by raising the price by over 100 percent.