Discussion Post: Wood Product Demand Supply
The following discussion is drawn from "Prices of Wood Products Plunge, Indicating Volatility in Industry, "Wall Street Journal, August 25, 1999.
Wood-product prices have plunged from their record and near record levels of only a few week ago amid an unexpected supply glut... Analysis cautioned that any slowdown in either the economy or housing market could cut short a resurgence in the timber industry that has been under way for much of the year.... markets will stabilize and even rebound as housing and remodeling activity pick up- as long as the Federal Reserve doesn't move to raise interest rate too much.
The supply of wood products recently exceeded demand in art because of the unusually hot summer weather in many parts of the country. That led to construction delays that backed up timber products in the distribution pipeline....
During the second quarter of 1999, the industry pulled out of a two-year slump that was prompted by an oversupply of wood products and slackened demand from Asian markets... Aside from being prone to vagaries of economic cycles... the industry suffers from being fragmented into thousands of producers who frequently manufacture excess quantities.
• Using standard demand and supply curves, describe and illustrate the effect on the equilibrium price and quantity in the wood products marked of (i) the unexpected supply glut, (ii) a slowdown in the economy or the housing market, (iii) the hot summer in many parts of the country, and (iv) the impact of changes in the Asian Markets.
• What changes in the macroeconomic environment that impact the wood products industry are discussed in the excerpt?
• What facts in the excerpt indicate that the wood products industry is highly competitive?
The response should include a reference list. Using one-inch margins, Times New Roman 12 pnt font, double-space and APA style of writing and citations.