If the producers of cotton shirts face higher cotton prices, which scenario is likely to occur?

Question

Quizplus · Accepted Answer

When the producers of cotton shirts face higher cotton prices, the cost of producing the shirts increases which leads to a decrease in the supply of cotton shirts. This decrease in supply causes the equilibrium price to rise and the equilibrium quantity to fall as demand remains constant. Therefore, the scenario that is likely to occur is that the supply of cotton shirts decreases, the equilibrium price of cotton shirts rises, and the equilibrium quantity falls, which is option A.

If the Producers of Cotton Shirts Face Higher Cotton Prices