Which of the following events would unambigously cause a decrease in the equilibrium price of cotton shirts?

a. an increase in the price of wool shirts and a decrease in the price of raw cotton
b. a decrease in the price of wool shirts and a decrease in the price of raw cotton.
c. an increase in the price of wool shirts and in increase in the price of raw cotton.
d. a decrease in the price of wool shirts and an increase in the price of raw cotton.

1 answer

You didn't guess? It's the old rule of "supply and demand." At first b looks attractive but a. is more attractive, because those who used to prefer wool shirts may now switch because of the price difference.

Sra