The “A” index is a proxy for the world price of cotton. From January 2010 to October of 2010, the price reflected by the “A” index increased about 80%. a) Provide two separate explanations for this price increase using shifts in supply or demand.b) What one piece of information would allow you to decide which of the two is a better explanation?

Managerial Economics: A Problem Solving Approach
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Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
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Chapter8: Understanding Markets And Industry Changes
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The “A” index is a proxy for the world price of cotton. From January 2010 to October of 2010, the price reflected by the “A” index increased about 80%.
a) Provide two separate explanations for this price increase using shifts in supply or demand.
b) What one piece of information would allow you to decide which of the two is a better explanation?

 

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