Quick Question about the interaction between input and output markets:
I learned in econ 101 that if the demand for a product increased, the curve would shift right and raise the price and quantity supplied. The supply curve would not move because the marginal cost of making the products has not risen; rather there is a movement along the current supply curve.
Taking this analysis a step further, if there is an increased demand for a product (lets say undershirts), then the quantity supplied increases, which increases the demand for cotton to make them. This increase in the demand for cotton increases the price of cotton (to allure more suppliers to the cotton market), and this increase in the supply of cotton should show up as a shift in the supply curve on the graph for undershirts.
So, what am I misunderstanding? Does the increase in the demand for undershirts also shift leftward the supply curve due to the predictable increase in cotton prices? Both increase the price of undershirts, but one increases the quantity demanded and the other decreases it?
And wouldn’t this cycle exist for most other products to? More demand for a product —> more demand for that products’ inputs ----> increased price of that input -----> leftward movement of the product’s supply curve?
So am I wrong or did econ 101 just not cover this interaction?