What impact would a sudden increase in the price of wood have on producers and consumers? how might each group respond to the change in price?

A sudden increase in the price of wood increases the cost of purchasing wood and products derived from wood for consumers. It also makes it profitable for the suppliers of wood since they would earn more per unit of wood sold. Holding all other factors constant, these changes would result in: higher quantities of wood supplied and lower quantities of wood demanded.

Explanation:

The law of demand dictates that lower prices result in higher quantities  demanded whereas higher prices result in lower quantities demanded.The law of supply dictates that lower prices result in lower quantities supplied whereas higher prices result in higher quantities supplied. Inflation is the constant increase in prices which lowers the nominal value of money

The following analysis is based on the assumption that the sudden increase in price is not inflationary.

A sudden increase in the price of wood, would make it an expensive raw material for producers who use it and a profitable inventory item for the suppliers who provide it. Holding all other factors constant, the higher the prices of goods, the higher the quantity supplied and the lower the quantity demanded. An increase in the price of wood provides an incentive for producers to increase the supply of wood in exchange for higher profits. On the other hand, an increase in the price of wood makes wood an expensive raw material for producers who use it to produce other goods and for consumers who purchase products made from wood, meaning that the quantity demanded will decrease.

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