In this NY Times article, the woes of this past summer are talked about with relation to world prices for cotton and other commodities. While this is applicable to many people who have grown up in the Lubbock area on a very personal level, it is relevant to us because it allows us to see an interesting supply and demand phenomenon. Consider the following quote from the article
"World cotton prices, which had been at historic highs, have fallen recently, Mr. Hudson said, but that is mainly because the sluggish economy and other factors have outweighed the loss of supply." So what we're seeing is a decrease in supply initially made prices increase, but a decrease in demand has brought them back down. Using a supply and demand graph, could you show this? Can we predict what the new equilibrium price will be (higher or lower)? Hint: what if the supply curve shifted further than the demand curve. What has happened to the equilibrium quantity? Comments are closed.
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July 2017
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