Suppose the demand for jeans increases. At the same time, because of an increase in the price of cotton, the supply of jeans decreases. How will it affect the price and quantity sold of jeans?
Increase in market demand for jeans along with the decrease in supply of jeans should raise the price of jeans and the quantity sold will decline.
In the given figure, when demand
increases to {{D}_{1}}
{{D}_{1}} and supply
decreases to {{S}_{1}}
{{S}_{1}}, price increases from
OP to {{OP}_{1}} and but quantity remains the same at OQ.
Because the proportionate increase in demand equals proportionate decrease in supply.
