Consider the market lot cotton a key ingredient for clothes. Suppose a major bli
ID: 1224404 • Letter: C
Question
Consider the market lot cotton a key ingredient for clothes. Suppose a major blight devastates cotton crops. a scientific study reveals that cotton is beneficial for skin health, and cotton is labeled as a suspicious import by US customs agencies. The change in the equilibrium price and quantity of t - shirts is ambiguous The equilibrium price of t shirts will increase, but the impact on quantity Is ambiguous. The equilibrium price and quantify of t shirts will increase The equilibrium price and quantity of t - shirts decrease the equilibrium quantity of t - shirts will increase but the impact on price is ambiguousExplanation / Answer
The equilibrium price of t-shirt will increase, but the impact on quantity is ambiguous.
Cotton is the main raw-material of t-shirt. The supply of cotton is interrupted because of its production disturbance. Such thing increases price of cotton as well as t-shirt. But the effect on quantity demand of t-shirt is not clear. The general tendency is increasing price decreases demand. Since wearing cotton-based cloths is healthy, consumers may not reduce their demand at a little price hike.