Question

Plywood is used in the construction of houses. if the price of plywood rises, what happens to the supply of houses?

a) the supply increases so that the supply curve shifts rightward.
b) the supply decreases so that the supply curve shifts leftward.
c) the quantity supplied increases but there is no shift in the supply curve.
e) the quantity supplied decreases and the supply curve shifts leftward.
d) the quantity supplied decreases but there is no shift in the supply curve.

Answer 1

An increase in the price of plywood raises construction costs, decreasing the supply of houses, which results in a leftward shift of the supply curve.

Step-by-step explanation:

If the price of plywood rises, the direct effect would be on the cost of constructing houses. Since plywood is a material used in house construction, an increase in its price would make construction more expensive. This would lead to a decrease in the supply of houses, as the higher costs would discourage builders from constructing as many houses at previous prices. The correct answer is b) the supply decreases so that the supply curve shifts leftward.