Which of the following events would unambigously cause a decrease in the equilibrium price of cotton shirts?

a. an increase in the price of wool shirts and a decrease in the price of raw cotton
b. a decrease in the price of wool shirts and a decrease in the price of raw cotton.
c. an increase in the price of wool shirts and in increase in the price of raw cotton.
d. a decrease in the price of wool shirts and an increase in the price of raw cotton.

You didn't guess? It's the old rule of "supply and demand." At first b looks attractive but a. is more attractive, because those who used to prefer wool shirts may now switch because of the price difference.

Sra

To determine which event would unambiguously cause a decrease in the equilibrium price of cotton shirts, we need to analyze the relationship between the changes in the relevant factors and the price of cotton shirts.

The equilibrium price of a good is determined by the interaction of its demand and supply. Any factor that affects either the demand or supply of cotton shirts can potentially impact the equilibrium price.

Let's break down the given events:

a. an increase in the price of wool shirts and a decrease in the price of raw cotton:
- An increase in the price of wool shirts might lead to a decrease in the demand for wool shirts, which could potentially increase the demand for alternative products like cotton shirts.
- A decrease in the price of raw cotton might lead to an increase in the supply of cotton shirts, as it becomes cheaper to produce them.
- The combined effect of increased demand and increased supply could either lead to a decrease or an increase in the equilibrium price, depending on the magnitude of these changes. Therefore, this event does not unambiguously cause a decrease in the equilibrium price of cotton shirts.

b. a decrease in the price of wool shirts and a decrease in the price of raw cotton:
- A decrease in the price of wool shirts might increase the demand for wool shirts, potentially reducing the demand for cotton shirts.
- A decrease in the price of raw cotton would decrease the production cost of cotton shirts, leading to an increase in supply.
- The combined effect of increased demand for wool shirts and increased supply of cotton shirts could potentially lead to a decrease in the equilibrium price of cotton shirts.

c. an increase in the price of wool shirts and an increase in the price of raw cotton:
- An increase in the price of wool shirts might decrease the demand for wool shirts, potentially increasing the demand for cotton shirts.
- An increase in the price of raw cotton would increase the production cost of cotton shirts, potentially reducing the supply.
- The combined effect of increased demand for cotton shirts and decreased supply of cotton shirts could potentially lead to an increase in the equilibrium price of cotton shirts.

d. a decrease in the price of wool shirts and an increase in the price of raw cotton:
- A decrease in the price of wool shirts might increase the demand for wool shirts, potentially decreasing the demand for cotton shirts.
- An increase in the price of raw cotton would increase the production cost of cotton shirts, potentially reducing the supply.
- The combined effect of decreased demand for cotton shirts and decreased supply of cotton shirts could potentially lead to an increase in the equilibrium price of cotton shirts.

Based on the analysis, option b. a decrease in the price of wool shirts and a decrease in the price of raw cotton, unambiguously indicates a decrease in the equilibrium price of cotton shirts.