Question

High street sales smashes forecasts

“Last month shoppers were encouraged by spells of good weather, pushing clothing

sales up 4.3% over the month as consumers refreshed their wardrobes with

summery items.”

Using a supply and demand diagram explain what happened in the clothes market.

Explain why there was not an increase in the prices of clothes.

Answer 1

Ans. As summers arrive, people buy summery items, increasing the overall demand for clothes in the market shifting the demand curve for clothes rightwards from D to D'. With summer season, suppliers also expect the changes in tastes of consumer towards summer clothing, so, they will will produce summer clothes increasing the overall supply of clothes in the market, shifting the suplly curve from S to S'. This will lead to increase in equilibrium quantity of clothing in the market from Q to Q' but price (P) won't change if increase in demand equals increase in supply of clothes i.e. if suppliers can correctly forecast the demand for summer clothing by the comsumers.

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