If, due to rising demand, the price of cotton rose 15 percent while the prices of other goods and services rose an average of 10 percent,
A)the relative price of cotton has risen and one would expect the output of cotton to rise as a result.
B)the relative price of cotton has risen and one would expect the output of cotton to fall as a result.
C)the relative price of cotton has fallen and one would expect the output of cotton to rise as a result.
D)the relative price of cotton has fallen and one would expect the output of cotton to fall as a result.

Question

If, due to rising demand, the price of cotton rose 15 percent while the prices of other goods and services rose an average of 10 percent,
A)​the relative price of cotton has risen and one would expect the output of cotton to rise as a result.
B)​the relative price of cotton has risen and one would expect the output of cotton to fall as a result.
C)​the relative price of cotton has fallen and one would expect the output of cotton to rise as a result.
D)​the relative price of cotton has fallen and one would expect the output of cotton to fall as a result.

Quizplus · Accepted Answer

The relative price of cotton has risen because its price increased by a greater percentage (15%) compared to the average increase in prices of other goods and services (10%). Typically, when the relative price of a good rises, producers are incentivized to increase production to take advantage of higher prices, leading to an expected rise in the output of cotton.

If, Due to Rising Demand, the Price of Cotton Rose