Think about how each scenario would affect the price of khaki pants.
a.A new technology reduces the time it takes to make a pair of khaki pants.
b.The price of the cloth used to make khaki pants falls.
c.The wage rate paid to garment workers increases.
d.The price of jeans increases.
e.People's incomes increase.
4.For each of the scenarios listed in Step 3, draw a demand–supply graph and label the axes with the price and quantity of khaki pants. Next, for each scenario, draw the appropriate demand–supply curve. Compare the new demand curve or supply curve by drawing it on the same graph.
quainty would go down
a. A new technology reduces the time it takes to make a pair of khaki pants:
This scenario would likely decrease the cost of production for khaki pants, as the reduced time in manufacturing would result in lower labor costs. As a result, the price of khaki pants would potentially decrease.
b. The price of the cloth used to make khaki pants falls:
If the price of the cloth used to make khaki pants decreases, the cost of production would decrease. This would likely result in a decrease in the price of khaki pants.
c. The wage rate paid to garment workers increases:
If the wage rate paid to garment workers increases, the cost of production for khaki pants would increase. This would likely result in an increase in the price of khaki pants.
d. The price of jeans increases:
If the price of jeans increases, it could lead to a substitution effect. Consumers may choose to buy khaki pants instead of jeans, leading to increased demand for khaki pants. This increased demand could result in a higher price for khaki pants.
e. People's incomes increase:
If people's incomes increase, this could lead to an increase in demand for khaki pants as consumers have more discretionary income to spend. This increased demand could result in a higher price for khaki pants.
For the demand-supply graph:
^
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| P2 D2
| /
| /
| /
| /
| /
| /
+-------------------> Q
S1 S2
- Scenario a would result in a shift of the supply curve to the right (S1 to S2), decreasing the price (P1 to P2) and increasing the quantity (Q1 to Q2).
- Scenario b would also shift the supply curve to the right, leading to decreased price (P1 to P2) and increased quantity (Q1 to Q2).
- Scenario c, on the other hand, would shift the supply curve to the left, increasing the price (P1 to P2) and decreasing the quantity (Q1 to Q2).
- Scenario d would affect the demand curve, shifting it to the right (D1 to D2), causing an increase in price (P1 to P2) and quantity (Q1 to Q2).
- Scenario e would also affect the demand curve, shifting it to the right (D1 to D2), leading to an increase in price (P1 to P2) and quantity (Q1 to Q2).
Note: The specific shifts in the supply and demand curves may vary depending on the specific circumstances of each scenario. The above illustrations are general representations for illustrative purposes.
a. A new technology reduces the time it takes to make a pair of khaki pants:
In this scenario, the decrease in production time results in an increase in the supply of khaki pants. This means that more khaki pants can be produced and brought to the market at a faster rate. As a result, the supply curve shifts to the right, indicating a higher quantity of khaki pants available at each price level. This increase in supply generally leads to a decrease in price, assuming demand remains constant.
To draw the demand-supply graph, you would first label the vertical axis as the price of khaki pants and the horizontal axis as the quantity of khaki pants. Then, plot the original demand and supply curves. Next, draw a new supply curve to the right of the original supply curve, indicating the increase in supply due to the new technology. Finally, observe that the new equilibrium point will have a lower price and a higher quantity of khaki pants.
b. The price of the cloth used to make khaki pants falls:
A decrease in the price of cloth used to make khaki pants affects the cost of production. With a lower cost of materials, the supply of khaki pants increases, as it becomes more profitable for suppliers to produce and sell them. This shift in supply results in a downward movement of the supply curve, indicating a higher quantity supplied at each price level. Consequently, the price of khaki pants decreases, assuming demand remains constant.
To illustrate this scenario on the demand-supply graph, start by plotting the original demand and supply curves. Then, shift the supply curve downwards to the right, indicating the increase in supply due to the lower cost of cloth. Observe that the new equilibrium point will have a lower price and a higher quantity of khaki pants.
c. The wage rate paid to garment workers increases:
If the wage rate paid to garment workers increases, it raises the production cost for khaki pants. As a result, the supply of khaki pants decreases because manufacturers find it less profitable to produce them. This reduction in supply shifts the supply curve upwards, indicating a lower quantity supplied at each price level. Consequently, the price of khaki pants increases, assuming demand remains constant.
To represent this scenario on the demand-supply graph, begin by plotting the original demand and supply curves. Then, shift the supply curve upwards, indicating the decrease in supply due to the higher wage rate. Observe that the new equilibrium point will have a higher price and a lower quantity of khaki pants.
d. The price of jeans increases:
Although the price of jeans is not directly related to khaki pants, it can still impact the demand for khaki pants. In this case, if the price of jeans increases, consumers may shift their preference towards purchasing khaki pants instead. This increase in demand for khaki pants will cause the demand curve to shift to the right, indicating a higher quantity demanded at each price level. Consequently, the price of khaki pants increases due to the increased demand, assuming supply remains constant.
To depict this scenario on the demand-supply graph, start by plotting the original demand and supply curves. Then, shift the demand curve to the right, indicating the increase in demand due to the higher price of jeans. Observe that the new equilibrium point will have a higher price and a higher quantity of khaki pants.
e. People's incomes increase:
If people's incomes increase, it generally leads to higher purchasing power, which can positively impact the demand for khaki pants. As a result, the demand curve for khaki pants shifts to the right, indicating a higher quantity demanded at each price level. This increase in demand typically leads to an increase in price, assuming supply remains constant.
To visualize this scenario on the demand-supply graph, begin by plotting the original demand and supply curves. Then, shift the demand curve to the right, indicating the increase in demand caused by the higher incomes. Observe that the new equilibrium point will have a higher price and a higher quantity of khaki pants.