Let’s build on this chapter’s example of asphalt. Suppose a new invention comes along that makes it easier and much less expensive to recycle clothing: Perhaps a new device about the size of a washing machine can bleach, re-weave, and re-dye cotton fabric to closely imitate any cotton item you see in a fashion magazine. Head into the laundry room, drop in a batch of old clothes, scan in a couple of pages from Vogue, and come back in an hour.
a. If you think of the “market for clothing” as “the market for new clothing,” does this shift the demand or the supply, and in which direction?
b. If you think of the “market for clothing” as “the market for clothing, whether it’s new or used,” does this shift the demand or the supply, and in which direction?
c. What will this do to the price of new, unrecycled clothing?
d. After this invention, will society’s scarce productive resources (machines, workers, retail space) flow toward the “new clothing” sector or away from it?