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. NOTE: diagrams can be created using a MS Office product, or drawn by hand and submitted as an image, or some other product of the student's choice.

Answer 1

a) Cotton is an input to produce sweatshirt. Damages of cotton crop will raise price of botton which will result in rise in cost of production of sweatshirts. It will induce producers to produce less sweatshirts which will reduce aggregate supply of sweatshirts and shift supply curve backwards from AS to AS1. It will raise price level and reduce output level from P to P1 and Y to Y1 respectively.

b) Fall in price of leather jacket will induce consumers to buy leathers jacket and less of sweatshirts. It will result in downward shift of demand curve of leather jacket which result in fall in price level from P to P1 and output level from Y to Y1.

c) Excercise in proper attire will raise demand of sweatshirts which will shift demand curve to its right. It result in rise in price level from P to P1 and output level from Y to Y1.

d) New knitting machines will help producers in producing more sweatshirts in less time possible. It will induce producers to produce more of sweatshirts and earn maximum profit possible. It will shift supply curve to its right which will reduce price level from P to P1 and output rises from Y to Y1.