Question

Suppose that the price of cotton used to make game-day t-shirts decreases. Which of the following will occur?

1) The price of game-day t-shirts will decrease
2) The demand for game-day t-shirts will increase
3) The supply of game-day t-shirts will decrease
4) The price of game-day t-shirts will increase

Answer 1

When the price of cotton used to make game-day t-shirts decreases, it will result in a decrease in the price of game-day t-shirts and an increase in the supply of game-day t-shirts.

Step-by-step explanation:

When the price of cotton used to make game-day t-shirts decreases, it will affect the supply of game-day t-shirts. Here's how:

1. The price of game-day t-shirts will decrease: Since cotton is a key input in the production of game-day t-shirts, a decrease in the price of cotton will lower the production costs for t-shirt manufacturers. As a result, they can afford to lower the prices of game-day t-shirts to attract more customers.
2. The supply of game-day t-shirts will increase: With lower production costs, t-shirt manufacturers will be incentivized to produce more game-day t-shirts. This will lead to an increase in the supply of game-day t-shirts in the market.
3. The demand for game-day t-shirts may or may not increase: The decrease in the price of cotton does not directly impact the demand for game-day t-shirts. The demand for game-day t-shirts depends on factors like consumer preferences, marketing efforts, and other external factors.