How Does Increased Demand for Pillows Affect the Price of Clothes?

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In summary, when the demand for pillows increases, the price of clothes will also increase due to the laws of supply and demand. This is because the increased demand for pillows leads to an increase in the price of cotton, which in turn raises the cost of production for clothes manufacturers, causing them to reduce supply and increase the price of clothes.
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Bipolarity
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Homework Statement



Suppose that cotton is used to produce only two products, pillows and clothes. If the demand for pillows increases, what will happen to the price of clothes? Explain your answer. Assume that the laws of supply and demand hold.


Homework Equations


Laws of supply and demand


The Attempt at a Solution


Since pillow's demand increases, its price increases, which makes it profitable for pillow suppliers to raise output. The raise in output is equivalent to an increased demand for cotton, since cotton is an input for pillow production.

The increased demand for cotton is reflected in an increase in its price, which is partially borne by clothes manufacturers in the form of increased costs. These increased costs force clothing manufacturers to reduce supply, causing the price of clothes to increase.

Please tell me if I am correct.

BiP
 
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  • #2
Looks logical.
 

Related to How Does Increased Demand for Pillows Affect the Price of Clothes?

What are composite goods?

Composite goods are products that are made up of multiple components or materials. They can be physical products, such as a car or a computer, or they can be services, such as a vacation package or a mobile phone plan.

How are composite goods different from other types of goods?

Unlike single-component goods, composite goods are made up of various components that work together to provide a specific function or service. They often require different manufacturing processes and involve complex supply chains.

What are the benefits of using composite goods?

Composite goods can offer enhanced functionality and versatility, as well as cost savings and efficiency in production. They also allow for customization and personalization, as different components can be combined to create unique products.

What are some examples of composite goods?

Some examples of composite goods include smartphones, which are made up of multiple components such as a screen, processor, battery, and camera; clothing, which can be made from a combination of fabrics and materials; and packaged food products, which often contain various ingredients and components.

What challenges arise in the production and distribution of composite goods?

One of the main challenges in producing and distributing composite goods is managing the supply chain and ensuring that all components are available and of high quality. There can also be challenges in coordinating different manufacturing processes and ensuring that the final product meets all safety and quality standards.

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