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Consider a simple model of demand and supply for the market for cotton

On your own, identify the equilibrium price and quantity. Next, suppose that cotton suppliers RAISE the price of cotton above the equilibrium price. Which of the following statements is true.

Group of answer choices

The demand curve for cotton will shift upwards and to the right.

Even though cotton suppliers raised the price, the amount of cotton consumers demand at each and every price remains unchanged

The demand curve for cotton will shift downwards and to the left

To analyze the given graph and answer the question:

1. **Identify the Equilibrium Price and Quantity**:
   - The equilibrium price and quantity are determined at the point where the supply curve (S) and the demand curve (D) intersect. This is marked by the black dot on the graph.

2. **Effect of Raising the Price Above Equilibrium**:
   - If the cotton suppliers raise the price of cotton above the equilibrium price, the quantity supplied will exceed the quantity demanded, leading to a surplus of cotton in the market.

Next, let's consider the provided statements:

1. **The demand curve for cotton will shift upwards and to the right.**
   - This statement is incorrect. A shift in the demand curve implies a change in demand due to factors other than price (e.g., consumer preferences, income, prices of related goods). Raising the price does not cause the demand curve to shift.

2. **Even though cotton suppliers raised the price, the amount of cotton consumers demand at each and every price remains unchanged.**
   - This statement is correct. When the price is raised above equilibrium, the quantity demanded decreases along the same demand curve. The demand curve itself does not shift; only the point of quantity demanded changes along the curve.

3. **The demand curve for cotton will shift downwards and to the left.**
   - This statement is incorrect. Similar to the first statement, a shift in the demand curve indicates a change due to factors other than price. Raising the price of cotton affects the quantity demanded along the same curve, not the position of the curve.

Therefore, the correct statement is:

**Even though cotton suppliers raised the price, the amount of cotton consumers demand at each and every price remains unchanged.**

Would you like any further details or have any questions about this analysis? Here are some related questions you might find interesting:

1. What happens to the supply curve if the cost of producing cotton increases?
2. How does a subsidy to cotton producers affect the supply curve?
3. What factors could cause the demand curve for cotton to shift to the right?
4. How do changes in consumer income affect the demand curve for cotton?
5. What is the impact of a price ceiling set below the equilibrium price on the market for cotton?
6. How would a decrease in the price of a substitute good affect the demand for cotton?
7. What are the effects of a price floor set above the equilibrium price on the market for cotton?
8. How can market equilibrium be restored after a surplus occurs due to an increased price?

**Tip**: Understanding the distinction between movements along a curve and shifts in the curve is crucial in supply and demand analysis.

Explore the concept of market equilibrium in the cotton supply and demand model. Learn how raising the price above equilibrium affects consumer demand and market surplus. Detailed analysis and answers to related questions provided.

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