Storms are activity is Sweden's most prevalent natural hazard. The storms in Gothenburgin 2013 became Sweden's second most costly natural catastrophe. To summarise, assume that the storms have just ruined poorer dwellings and assume that there are only two levels of quality, low and high.

QUESTIONS:

a) Forecast the effect of the storms on the equilibrium price of high-quality dwellings (houses).

• With a drawn graph to illustrate your answer.

b) Forecast the effect of the storms on the equilibrium price of low-quality dwellings (houses).

• With a drawn graph to illustrate your answer.