ECON100 – HOMEWORK 6

1) What was the response from farmers all around the world (in India, in Brazil, and in
Egypt) to the US President Abraham Lincoln’s order on 12 April 1861 to the US Navy to
blockade the ports of the Confederate states?

After the blocking decision made by American President Abraham Lincoln, cotton grown in
America could not reach the textile factories in England, and this caused a decrease in production
despite an increase in demand. Taking advantage of this, cotton sellers increased the price of
cotton 6 times compared to before. This being the case, cotton alternatives to American cotton
began to be sought in the world. Later, cotton was brought to England from various parts of the
world, especially India. Hearing this, field owners around the world started to abandon their
previous crops and plant cotton in their fields, believing that it would bring more profit.

2. What was the response of the firms like Dobson and Barlow in England, who made
textile machinery, to President Abraham Lincoln’s above-mentioned order?

We said that when new searches for American cotton began, manufacturers found the most
suitable cotton in India. However, this caused a completely different problem. Indian cotton was
quite different from American cotton and required different treatments than American cotton.
This being the case, new textile machines began to be developed to process Indian cotton. As
demand for new equipment increased, firms such as Dobson and Barlow, which produced textile
machinery, saw profits rise. The company responded by increasing production of new machines.
3. “To understand how the change in the price of cotton transformed the world cotton and
textile production system, think about the prices determined by markets as messages.”
What is meant by that? What kind of messages? Who is (are) the sender(s) of these
messages? Who are the receivers?

What is meant by the word "message" here is that producers change prices and direct the market
in order to maintain the supply-demand balance. As explained in this example, the increased
demand for cotton and the low supply caused by the blocking decision meant that prices
increased, and this was a "message" for producers. Rising oil prices give you a message: "get on
the train." This message is also another message that means "increase the number of trips" for
those who operate railway transportation. What sends this message is the effect of the supply-
demand balance on the market. The recipients of the message are people who examine the
market effects of increased demand or increased supply and act accordingly.

Bünyamin Emre EFE

0083827
Collage of Engineering
Econ100 – Sec03