Answer to Question #308150 in Microeconomics for Usman ali

Question

Q-6. Using supply-and-demand diagrams, show the effect of the following events on the market for sweatshirts.

a. A hurricane in South Carolina damages the cotton crop.

b. The price of leather jackets falls.

c. All colleges require morning exercise in appropriate attire.

d. New knitting machines are invented.

Answer 1

a)

The destruction of cotton crops will reduce the supply of sweatshirts. The price will increase hence a decrease in quantity demand. The supply curve will shift upwards as shown below.

b)

Since leather jackets are a substitute for sweatshirts, the fall in their price causes a decrease in the demand for sweatshirts. Demand curve shifts to the left as shown below.

c)

Since sweatshirts are not appropriate for doing morning exercise, their demand will fall. Demand curve shifts to the left as shown below.

d)

The invention of new knitting machines will reduce the cost of production hence price will fall leading to an increase in supply. The supply curve will shift to the right as shown below.