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Suppose the dry bulk shipping and shipbuilding markets are in equilibrium when the world commodity exports are hit by a strong decline in commodity...
Suppose the dry bulk shipping and shipbuilding markets are in equilibrium when the world commodity exports are hit by a strong decline in commodity prices.
a) Explain how this event likely affects the dry bulk shipping freight rate and output level in the short run and in the long run. State relevant assumption(s) to support your answer if necessary.
b) Explain the effect of the above event on the shipbuilding market in the long run. Illustrate your answer using a two-part diagram showing the connection between the shipping and shipbuilding markets.
