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'1 thing and Footwear prices in the UK have been faliing over 2020. The contrlebUtion from clothing and footwear to the headline rate has mostly

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'1 thing and Footwear prices in the UK have been faliing over 2020. The contrlebUtion from clothing and footwear to the headline rate has mostly been ' " negative over the last two years. Within the year, prices normally follow a clear seasonal pattern. rising over the period from January to May, then falling between May and July as items are placed on sale in preparation for the arrival of autumn product ranges. Prices then tend to rise until further sales in December and January. Throughput 2020, we have seen clothing and footwear prices follow a different pattern compared with previous years. We recorded increased discounting during March and April 2020, probably in response to the lockdown, then prices were relatively stable (compared with previous years) to August 2020. Between August and October 2020, prices broadly increased as usual, but this has been followed by a fall between October and November 2020, because of notable sales in November as many areas went into lockdown. - Despite clothing prices rising slightly in December 2020, prices fell by 4.6% between December 2020 and January 2021 as a result of increased discounting. This meant the dewnward contribution to the CPIH 12-month inflation rate from the clothing and footwear group increased in magnitude to 0.22 percentage points in January 2021.\" We can consider this fall In prices being cause by producers responding to a change in consumer behaviour. We can assume that consumer preferences for new clothes have fallen during 2020 as discussed in the quote from the ONS above. A)'Draw a market demand and supply diagram showing how the change in preferences will impact on the market for clothing. Provide a brief explanation of your diagram. [15 MARKS] ' B) Assume the market for clothing is perfectly competitive. Draw the cost and revenue curves for a representative firm in the perfectly competitive market, ' showing how the change in demand you drew In part a Will impact on the rms in this market. Explain how the rms in the market will respond to the changing situation over time. [35 MARKS]

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