Question

Using supply and demand diagrams, show the effect of the following events on the market for sweatshirts. A hurricane in South Carolina damages the cotton crop. The price of leather jackets falls. All colleges require morning exercise in appropriate attire. New knitting machines are invented. Each original post should include four diagrams with an explanation for each. Respond and engage with at least two of your classmates in your group.

Answer 1

Hurricane in South Carolina damages the cotton crop which is an input to the production of sweatshirts. This will reduce the supply of input and hence increase the price of production. Hence supply of sweatshirts will fall i.e. supply curve shifts left. The equilibrium price of sweatshirts increases and the equilibrium quantity falls.

Leather jacket is perfect substitute for sweatshirt. When price of leather jackets falls people will demand more of leather jackets and less of sweatshirts because leather jackets have become relatively cheaper. As a result, the demand for sweatshirts decreases i.e. demand curve shifts left. Both equilibrium price and quantity falls.

All colleges require morning exercise in appropriate attire will cause the demand for sweatshirts to increase i.e. the demand curve shifts right. Both equilibrium price and quantity rise.

New knitting machines that are invented will increase the supply of sweatshirts i.e. the supply curve shifts to the right. Equilibrium price of sweatshirts decreases and equilibrium quantity increases.