Firms that use cotton as their key factor of production in producing t-shirts also have the ability to use their factors of production to produce sweatshirts instead. As the weather gets colder, demand for sweatshirts increases and thus their price increases relative to that of t-shirts. What is the most likely effect of this on the market for t-shirts?

Question

Business

Shayna

15 July, 16:45

Firms that use cotton as their key factor of production in producing t-shirts also have the ability to use their factors of production to produce sweatshirts instead. As the weather gets colder, demand for sweatshirts increases and thus their price increases relative to that of t-shirts. What is the most likely effect of this on the market for t-shirts?

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Answers (1)

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Edward · Answer 1

The supply curve for t-shirts will shift to the left.

Explanation:

When the price of a key input increases, or its availability decreases, the supply curve will shift to the left. This results in the price of the good or service increasing at every level of demand.

In this case, since cotton is used to produce sweatshirts for the winter, the production of t-shirts will decrease, shifting the supply curve to the left.