Q2. The Market for Lumber and Housing in the US

There has been a strong increase in global demand for building materials (especially timber) from mid-2020 to 2021, which has led to delays on various construction sites such as in Australia, France, the US. Read the following articles (and links within) and then answer the question below:

-Use the demand and supply (D&S) model to demonstrate the change in the market conditions from 2019 to 2021 for the lumber market and the housing market in the US.

Use two separate D&S diagrams, and carefully label the curves and clearly indicate all equilibrium prices (and quantities).

There is no need to calculate per se the price elasticity of supply (PES), but you may wish to discuss (and illustrate) PES determinants for students who want to work on a high-standard extended answer.

Making up figures (i.e. being hypothetical) is fine and a good practice for all questions (when no data to draw upon). For example, it is hard to get actual quantity figures for the x-axis. To be on the safe side, just state to the reader that you are using hypothetical valuesthat way you are informing the reader/marker exactly what you're doing.

Marking critera:

In this assessment, the quantity and quality of the explanation matters. There are no specific word limits per se, so long as what is written contributes to and strengthens your analysis. Brief answers given with less attention to detail but assuming you get most of the raw basics correct should earn you a satisfactory (pass or low credit grade) overall

Links to the articles:

1.Sheffey, Ayelet and Libertina Brandt (2021) "Lumber prices are so high that many builders are holding back on construction" Business Insider, March 26, available online: https://www.businessinsider.com.au/why-is-lumber-so-expensive-homebuilding-real-estate-newbuild-inventory-2021-3

2.Lambert, Lance (2021) "Lumber prices are up a staggering 188%when will the wood shortage end?", Fortune, March 20, available online: https://fortune.com/2021/03/20/lumber-prices-2021-chart-when-will-wood-shortage-end-price-of-lumber-go-down-home-sales-cost-update-march/

3.Subramanian, Samanth (2021) "The US wood shortage can be traced to a decades-old beetle infestation in Canada", Quartz, March 18, available online: https://qz.com/1985276/america-is-running-short-of-wood/