Question

Question 9 of 10

If a new source of lumber is found, what is likely to happen to the price of
lumber, and why?
A. The price is likely to increase because demand will increase.
B. The price is likely to increase because costs of production will
increase
C. The price is likely to decrease because demand will decrease.
O D. The price is likely to decrease because supply has increased.
SUBMIT

Answer 1

O D. The price is likely to decrease because supply has increased.

SUBMIT

Step-by-step explanation:

A new source of lumber will result in an increase in the quantity available for sale. As per the laws of supply and demand, an increase in supply without a corresponding increase in demand leads to reduced prices.

The prevailing market price or equilibrium price is the price at which the current demand matches the current supply. There are no shortages or excesses. An increase in supply creates a surplus in the market. For suppliers to sell the excess lumber supplied, they have to reduce prices to create more demand.