The Impact of Technological Innovations on the Cotton Yarn Market

We assume that cotton yarn is a normal good, and that the population is growing while income per capita is increasing. This graph shows how demand shifts to the left, resulting in an increase in both price (P) and quantity demanded (Q) if ceteris paribus (CP) holds.

However, there have been some changes that have made cotton yarn cheaper. Firstly, there have been significant technological advancements such as the water frame or the mule jenny. These innovations were not cheap, but they led to the emergence of the factory system, which benefited from economies of scale and reduced the average cost per unit.

Moreover, technology has also had an impact on labor, as it enabled the utilization of cheap labor sources such as women and children. These factors have contributed to a reduction in the cost of inputs for producing cotton, resulting in a rightward shift in supply.

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