"Region's Clothing Stores Bump up Costs as Cotton Gets More Expensive"

This article from the Roanoke Times is a perfect example of the effects of supply and demand on the price that consumers must pay for a good. In the case discussed in the article, the supply of cotton on the world market has been drastically reduced because of damage to the cotton crop in China the world's largest cotton-growing country, loss of land to grow cotton in the United States as more land is being used for other purposes, and finally the increased demand for cotton clothing in many countries around the world. All of these factors have led to a restricted supply of cotton for clothing manufacturers.

As the worldwide supply has dwindled, prices for raw cotton have reached record levels. This rise in the price of the natural resource has most likely led to an increase in the variable costs manufacturers have had to pay in order to produce cotton garments. Some manufacturers are looking for ways to use less cotton in their products to help reduce these variable costs. As the cost of producing these items has increased, the clothing manufacturers have been forced to pass their expenses on to the stores that purchase their products for sell. Consequently, as the retail stores' expenses have risen, they have been forced to raise the price of the cotton clothing they sell, meaning that their customers have ended up paying more for the items they purchase.

The rise in the price of cotton would be shown as a shift to the left on a supply curve. Since demand has also increased, there would also be a shift to the right on the demand curve. If this trend continues, consumers will eventually be unwilling to pay the higher prices for cotton clothing. They will instead search for a substitute for the cotton clothing that they would normally buy. They will look for a cheaper alternative when deciding what kind of clothing to purchase for themselves and their families. The rising prices and the substitution effect will cause the demand for cotton to eventually decrease. As this happens, gradually the amount demanded and the amount supplied will once again become equalized meaning that a new equilibrium price will have been reached. When this occurs the cotton market will have stabilized and the prices for cotton clothing will probably decrease. Unfortunately there is no set timetable for when this stabilization will occur. Until then, we will all be paying more for the cotton products we purchase.


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