[jicheng]

Wiley Question –

Hi,

I am asking for help on one BEC question about economics,

In the short run, a severe hurricane creates an immediate strong increase in demand for roofers. Some roofers in other parts of the country are then attracted to the disaster area. Assume that in the long run the increase in demand still exceeds the increase in supply. Incorporating these facts in an analysis, the price for roofers in the short run increases, while in the long run the price will

A.Decrease below the original price.

B/Return to the original price.

C.Decrease, but remain above the original price.

D.Continue to increase.

The answer is C. And the explanation does not make sense to me. Anyone has ideas?

Thank you in advance

[Biff-1955-Tannen]

I can only venture a guess, but my thinking is that the increase in demand will raise the price, but with all of the new roofers in the area now there is lots of competition. So while in the short run they were able to charge a higher price because the demand was so much greater than supply, but as new roofers came to the area, the difference between supply and demand was lessened… resulting in a decrease in their price, but it is still above their original price.

AUD 93 Jan 16
BEC 83 Feb 16
FAR 83 Apr 16
REG 84 May 16

99% Ninja MCQ only

[jicheng]

Thank you. I think your answer make sense.

[Author]

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