Use the scenario below and write a three-paragraph essay describing its effect on prices for food, housing, and oil. Pay particular attention to how consumer demand would change and how the event would affect production costs and business cycle. C. The environmental protection agency relaxes environmental rules on timber production.
Answer with Explanation:
The relaxation of environmental rules on timber production would result in increase in deforestation which will result in increase in Carbon dioxide emission surplus because the plants would be in lower quantity than before.
Apart all these factors, the food prices would increase because of decrease in the rain as the production will fall and this fall in production is basically a decrease in supply. This decrease in supply would increase the demand of the product and hence the price of the product will increase. This all because of the fact the deforestation caused by the timber cutting would decrease the chances of rain in the country. The production of the food would be affected by the rain and hence the price of the food would grow in the long term.
The price of the housing will now decrease as the supply of timber will increase in the market which will result in decrease in the price of the timber and related poducts that can be used as a substitute or alternative products. So this will decrease the price of the housing. The customer demand of the timber would only grow if the supply of the timber is more in quantity than before which reduce the price of the product significantly. The future of the timber use in housing would definitely grow which means it will be in growing business and that the customer will also prefer timber due to its qualities and the reduced cost of the timber.
The prices of the oil will remain unaffected as the cutting of timber have very minor impact on the supply or demand of the product.
Hence the housing sector will enjoy the most of the benefits and the industry that will very slightly suffer is food industry in the long term due to the impact of deforestation.