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

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An increase in demand for pillows leads to a higher price for pillows, prompting suppliers to increase production. This heightened production requires more cotton, driving up the demand and price of cotton. As cotton prices rise, clothing manufacturers face increased production costs. Consequently, they reduce their supply of clothes, resulting in an increase in clothing prices. The analysis aligns with the laws of supply and demand.
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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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