What might cause the price of goods and services to fall during a recession?

Question

This is for a macroeconomics assignment. Specifically... I'm wondering how the price of cotton could drop in a recession. I thought demand would decrease, but that pushes the price up. Help!

Answer 1

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If supply is decreased the price will increase.

Think about it. You're a consumer and your demand for something has decreased because you can't afford it. You can think about it in terms of cotton or anything else. Say shoes. People don't have the money in a recession to buy lots of really expensive shoes, so in order to sell shoes, the people making them must reduce the price enough to where you're willing to buy them.

Decrease in demand forces producers to be more competitive.

Answer 2

Less demand.

Source(s): Economist