What methods could lumber companies use

Reference no: EM13184289

The demand for lumber, like that for carpenters, is a derived demand-derived from lumber demand in its many uses, particularly housing. When the demand for new housing increases, so does the demand for lumber. For example, as the U.S. economy recovered from the 2001 recession, the demand for housing increased.Housing prices rose. This fueled the demand for lumber, a key resource in residential construction. The demand curve for lumber shifted rightward. Increased demand for housing boosted lumber prices between late 2001 and mid 2004. For example, the price per thousand board-feet of framing lumber jumped from $281 in October 2001 to $473 in August 2004, a rise of 68 percent. But in 2005, the U.S. housing market began to slump, and the slide stretched into 2007, and fell off a cliff in 2008.

Describe what happened after 2005 in terms of market demand and market prices for housing, the derived demand for lumber and the shift in lumber's demand curve. What did this mean for the profitability of the lumber industry and individual lumber companies? What methods could lumber companies use to adjust to the changed market conditions?

Reference no: EM13184289

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