Abstract Currency
Yard MarketTeaching tool← All content

Interactive teaching tool

Yard Market

Most explanations of supply and demand start with two lines crossing. This one starts with boards on the ground. A shortage here is an empty stall and a buyer walking away; a surplus is a pile nobody bought. The curves are drawn at the end, as a summary of what you already watched happen — and the price of lumber reaches the housing market on its own, because every house is 30 thousand board feet of it.

Horizon

Nothing gets built. Mills run the shifts they already have, crews are the crews you have, and almost all of the adjustment lands on price.

Focus
Predict first

Pick a scenario or move a slider, then predict what it does before you run it.

Price
Quantity traded
Left in the yard
Scenariosone click fills the sliders
Shock slidersboth markets
Lumber · supply
×1.00
Lumber Sat baseline

Saw lines running at each existing mill. Short run: A month buys you overtime, not a new saw line.

×1.00
Lumber Sat baseline

How much timber reaches the mills at all. Below 1 is a fire, a beetle kill or a harvest ban. Short run: Bites immediately: a mill with no logs cannot cut, whatever the price.

×1.00
Lumber Sat baseline

Diesel and trucking per thousand board feet. Short run: Raises marginal cost now — the curve shifts left, capacity is untouched.

×1.00
Lumber Sat baseline

What it costs to run a shift. Short run: Straight into marginal cost; shifts supply left.

Lumber · demand
×1.00
Lumber Dat baseline

Multiplier on the demand the housing market sends down. Leave at ×1.00 to let the cascade drive it. Short run: Framing crews order for the houses they are starting this month.

×1.00
Lumber Dat baseline

Decks, re-roofs and post-storm rebuilding — lumber demand that has nothing to do with new houses. Short run: Arrives all at once after a storm and competes with builders for the same pile.

Houses · supply
×1.00
Houses Sat baseline

Framing, roofing and finish crews available to start houses. Short run: Fixed within a month — you cannot conjure a framing crew.

×1.00
Houses Sat baseline

A ceiling on starts that no price can lift. Not a cost — a wall. Short run: Binding the moment it is below what builders would otherwise start.

×1.00
Houses Sat baseline

Labour cost per house. Short run: Raises the cost of every house started now; shifts supply left.

Input costs — linked, not set here. At $450/MBF, the wood in one house is $13k of a $334k build cost. Move the lumber market and this moves housing supply on its own.
Houses · demand
×1.00
Houses Dat baseline

How many new households are looking for somewhere to live. Short run: Shows up as buyers at the open house this month.

×1.00
Houses Dat baseline

What buyers can carry. Housing is a normal good here: richer buyers want more of it. Short run: Bonuses and layoffs both land inside a month.

6.00%
Houses Dat baseline

The price of the loan, not of the house. Moves what a given payment can buy. Short run: The fastest-moving housing demand shifter there is — it repriced every buyer overnight.

Expectations and substitutes. They are the two shifters people forget, and the two that make the yard behave strangely.

Step 1 Pick a scenario or push a slider. Nothing runs until you have predicted.

The lumber yard

raw input
$450/ MBF
target stock
in the yard
cut
sold

One board drawn = 200 MBF. Capacity this period: 5,175 MBF (mill hours).

cut this period
4,500
sold
4,500
left in the yard
1,125
BALANCED — Cleared. Everything offered found a buyer and the yard holds the stock it means to hold.

The job site

finished good
$400k/ house
■ sold ▤ finishing □ unsold spec home ⌁ not built

One house drawn = 5 houses. Capacity this period: 138.0 houses (crew hours).

Every start orders 30 MBF. At $450/MBF that is $13k of framing inside each house — which is why the yard above moves this lot.
started
120
sold to buyers
120
unsold spec homes
15
BALANCED — Cleared. Everything offered found a buyer and the lot holds the stock it means to hold.
Lumber
$90005,681 MBFQ →P ↑SD
Houses
$800k0192.0 housesQ →P ↑SD

Drawn from the same solver the yard is: the flat top on a supply curve is the capacity ceiling, and the bend near the bottom is mills shutting down rather than selling below cost. Dashed curves are where things stood before the shock.

Lumber$ / MBF
beforenowP$450—Q4,500 MBF—
Supply: Steep — quantity moves a little, price moves a lot0.21
Demand: Very steep — quantity barely responds — price does all the work0.10
Houses$k / house
beforenowP$400k—Q120.0 houses—
Supply: Firm — price still carries most of the adjustment0.64
Demand: Firm — price still carries most of the adjustment0.60
The yard at rest

Both markets are sitting on their reference point: the yard holds the stock it likes to hold, mills cut what builders order, and every house started gets sold. Nothing here is a curve yet — it is 1,125 MBF standing in a yard and 15.0 houses standing on a lot.