Nowadays, the level of demand in cotton increases significantly at the clothing market in New York. In the US, $120 billion of business revenue is stimulated by cotton. The price of cotton rises up until a half of the normal prices. Around 97 percent of US net domestic consumption of cotton was from imports, even though an estimated 27 percent of those cotton goods contained US’s cotton. In this era globalization, the demand of cotton reaches a peak at the same time with the increasing supply of cotton. The necessity of cotton raises concomitant with the development of fashion industry. In the newest period, cotton has been the necessity in human’s life. Mostly people use cotton for producing or consuming goods.
In figure graph is clearly shown that an increase in demand raises the price and decreases the quantity. Otherwise, an increase in supply lowers the price and increases the quantity. The quantity of cotton also increases when both demand and supply increase. In this case, when the demand of cotton in New York increases, it will be higher the price of cotton automatically. Then, when the supply of cotton increases, the price will be cheaper in New York. However it would be impacted to the quantity of cotton.
Cotton is a basic crop that is a major input for the textile, agriculture, and food industries. Around 64 percent of cotton is used for apparel, 28 percent for home furnishings, and 8 percent for industrial products. It establishes an increasing demand of cotton in human’s life. In this era Globalization, the increasing demand of cotton is followed by the increase in supply of cotton. That also brings cotton into the competitive market which has a lot of buyers and sellers, so in this market there is no single buyer or seller can influence the price.
In New York, the demand of cotton increases significantly while, the plant growth was stunted because of bad weather. But the demand of cotton is continuously increase. The increasing demand of cotton will impact the substitution of price, the increasing of population, the decreasing of complementary price, the rising of income, and the increasing of future expectation. When the price of cotton rises, obviously it gives the opportunity cost and benefit to the other things. That condition also brings some advantages in our life. When the price of cotton increases, of course it increases the income of the country itself. However, that situation also has disadvantages. Firstly, the demand of cotton will increase, secondly the substitution of price will decrease, thirdly it raises the complimentary price, then it decreases the income, next the population will be decreasing, then the future of expectation income will decrease, and the last the expectation of future praise will decrease. According my opinion, the demand of cotton in New York’s market is facing a disproportion with the condition of environment. The articles mentioned that New York was faced the bad weather, while the demand of cotton in market was reached a peak. This condition affects the falling of future income expectation and the falling of future price expectation in New York’s Market. Beside of that the development of producing and consuming cotton isn’t in the market equilibrium, because neither quantity demanded nor quantity supplied doesn’t balance.
As the articles mentioned that although the increasing of cotton price is reached a peak from $ 0,8 to $ 1,30, the demand for cotton remains go up. This fact strongly reduces the shortage because it decreases the quantity demanded and increases the quantity supplied. Therefore, the increasing prices of cotton offer the greatly impacts of clothing industry in New York’s market. It’s because, the demand of cotton which increases through the possibility at equilibrium market.
In the other hand, it totally makes the increasing price of cotton above the normal price goods in New York. The rising prices of cotton also encourages the increasing of producing the clothe itself. Then a successful of New York’s Market in producing cotton by using rare productive resource involved the elasticity of supply.
If the price is set too high, excess supply will be created within the economy and there will be allocated inefficiency. At price P1 the quantity of goods that the producers wish to supply is indicated by Q2. At P1, however, the quantity that the consumers want to consume is at Q1, a quantity much less than Q2. Because Q2 is greater than Q1, too much is being produced and too little is being consumed. The suppliers are trying to produce more goods, which they hope to sell to increase profits, but those consuming the goods will find the product less attractive and purchase less because the price is too high.
As the articles reveal, “consumers tend to become acutely aware of price changes”. In the cases, it’s clearly shown that if the demand of cotton increases, it will appear a shortage that will encourage market to decrease the prices. To prevent the shortages, the market must increase the quantity prices. Obviously, it will decrease the demand of cotton automatically.
In the conclusion, to deal with this issue I thought that government could intervene by increasing it is spending (which is an injection in the circular flow of income) and by decreasing income taxes, so consumers have more disposable income to spend on goods.
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