Question

Suppose a drop in the price of cotton reduces the overall cost of producing cotton T-shirts. Everything else held constant, we would predict that this would lead to a:

Answer 1

A drop in the price of cotton would lead to a decrease in the price of cotton T-shirts, making them more affordable for consumers and increasing the demand for cotton T-shirts.

Step-by-step explanation:

Suppose a drop in the price of cotton reduces the overall cost of producing cotton T-shirts. Everything else held constant, this would lead to a decrease in the price of cotton T-shirts.

When the cost of production goes down, producers can offer the same quantity of T-shirts at a lower price. This would make cotton T-shirts more affordable for consumers.

As a result, we would predict an increase in the demand for cotton T-shirts, as consumers are more likely to buy them due to the lower price.