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How a natural disaster affects supply and demand in a market

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Suppose you are asked to do a market analysis in an area in which a natural disaster has recently occurred. For example, Nashville after the Spring floods or New Orleans after Hurricane Katrina.

Other than building supplies, choose a market for a good or service that will be affected. Will demand or supply be affected? What happens to equilibrium prices and output in this market?

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A market that will be affected in an area hit by a disaster is restaurant meals. People in the affected area will want to buy their food quickly and cheaply at supermarkets, not sit down for a slow, expensive ...

Solution Summary

An example of how supply and demand for restaurant meals will be affected by a natural disaster.

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Suppose you want to start a business in an area in which a natural disaster has recently occurred.How would you decide which kind of business to start? Choose a business in an industry that has been affected, either in a negative or positive way, by the natural disaster. Will demand, supply, or both shift as a result of the event? What happens to equilibrium prices and output in this market? Would you expect these effects to be short-term, or will they impact the long-term performance of the business?

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