Assume a drought in Texas reduces the supply of cotton. Noting that cotton is a

Question

Assume a drought in Texas reduces the supply of cotton. Noting that cotton is a basic ingredient in the production of underwear and that silk underwear is a consumer substitute for cotton underwear, we would expect the price of cotton to:
A) rise, the supply of cotton underwear to increase, and the demand for silk to increase.
B) rise, the supply of cotton underwear to decrease, and the demand for silk to increase.
C) rise, the supply of cotton underwear to decrease, and the demand for silk to decrease.
D) fall, the supply of cotton underwear to increase, and the demand for silk to increase.

Explanation / Answer

C) rise, the supply of cotton underwear to decrease, and the demand for silk to decrease.

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