a).
Consider the following fig.
So, here “D” be the demand and “S” be the supply of “Aluminum” in Germany, => the autarkic equilibrium “P” will be determined by the intersection of “D” and “S”. So, here the equilibrium “P” is given by “Pe”.
b).
Now, if Germany will not be connected with the world trade, => the equilibrium autarkic price will prevail that is “Pe”. Now, the autarkic price can be more, less and exactly equal to “$0.85”. Since if Germany is in autarkic situation, => the price will totally depends on the “D” and “S” and not on the “world price”.
c).
Now, let’s assume that “P” is more than “0.85”, => under free trade “Pw=0.85” will prevail “Pe” will not prevail.
So, here as the “P” decreases implied “CS” increases by “A+B” and “PS” decrease by “A”. So, here the total surplus increases by “B”.
d).
Now, let’s assume that Australia is a large country, => have power to influence the world “P”. Consider the following fig.
So, here the initial world equilibrium “P” is given by “Pw1” the intersection of “MD1” and “XS1”. Now, recession cause the demand to decrease, => the import demand decrease to “MD2”, => the new world price decrease to “Pw2” the intersection of “MD2” and “XS1”. So, the world equilibrium price and the level of import both decreases.
1. Supply and Demand Illustration of Trade In January 2019 the cost of aluminum in US...
1. Supply and Demand Illustration of Trade In January 2019 the cost of aluminum in US dollars is $0.85. Currently, in the global aluminum market, Australia is an exporting country and Germany is an importing country. a) Treating Germany as a “small” country, illustrate the German supply and demand for aluminum in the absence of trade. b) If Germany weren’t trading with the world, would Germany pay $0.85 for aluminum, or a price that is either higher or lower than...
Italy’s demand and supply for cheese is given in the table below: Price (US $) Qty. Demand Qty. Supplied 15 4000 1000 20 3500 2000 25 3000 3000 30 2500 4000 1.Draw the demand and supply diagram. What is the domestic equilibrium price and quantity? 2.If the world price of cheese is $20, (add this to the diagram) would Italy become an exporting or importing country for cheese? 3.Who gains and who loses from trade? Show the gains from trade...
Suppose there are 2 countries that have the following supply and demand equations in autarky Country A Demand: Q = 800 - 2P Supply: Q = 2P - 200 Country B Demand: Q = 400 - 2P Supply: Q = 2P - 80 a) Given the information above which country would be the importer? (Enter A, B) b)What would be the Free Trade Price? c) If the importing country imposes a tariff equal to $10 per unit, what would be...
Question 1: Large country trade: Country A: demand: Q=400-P, supply: Q=P-20 Country B: demand: Q=300-P, supply: Q=2P-30 Which country is importing? What is the global price under free trade? (10%) Compute the social surplus of each country. (5%) If the importing country impose a $20 tariff, what is the change in social surplus in each country? (15%)
4. Effects of a tariff on international trade The following graph shows the domestic supply of and demand for soybeans in Venezuela. The world price ( PW ) of soybeans is $540 per ton and is represented by the horizontal black line. Throughout the question, assume that the amount demanded by any one country does not affect the world price of soybeans and that there are no transportation or transaction costs associated with international trade in soybeans. Also, assume that...
5. Welfare effects of free trade in an exporting country Consider the New Zealand market for lemons. The following graph shows the domestic demand and domestic supply curves for lemons in New Zealand. Suppose New Zealand's government currently does not allow the international trade in lemons. Use the black point (plus symbol) to indicate the equilibrium price of a ton of lemons and the equilibrium quantity of lemons in New Zealand in the absence of international trade. Then, use the green point (triangle...
Consider the Venezuelan market for soybeans. The following graph shows the domestic demand and domestic supply curves for soybeans in Venezuela. Suppose Venezuela's government currently does not allow international trade in soybeans. Use the black point (plus symbol) to indicate the equilibrium price of a ton of soybeans and the equilibrium quantity of soybeans in Venezuela in the absence of international trade. Then, use the green triangle (triangle symbol) to shade the area representing consumer surplus in equilibrium. Finally, use the purple...
Consider the Bolivian market for lemons.The following graph shows the domestic demand and domestic supply curves for lemons in Bolivia. Suppose Bolivia's government currently does not allow international trade in lemons.Use the black point (plus symbol) to indicate the equilibrium price of a ton of lemons and the equilibrium quantity of lemons in Bolivia in the absence of international trade. Then, use the green triangle (triangle symbol) to shade the area representing consumer surplus in equilibrium. Finally, use the purple...
4. Effects of a tariff on international trade The following graph shows the domestic supply of and demand for oranges in Guatemala. The world price (Pw) of oranges is $800 per ton and is represented by the horizontal black line. Throughout the question, assume that the amount demanded by any one country does not affect the world price of oranges and that there are no transportation or transaction costs associated with international trade in oranges. Also, assume that domestic suppliers...
Question 1: In a perfectly competitive market, the demand curve is given as: Q=100-5P, the supply curve is given as Q=3P-12. Compute the total social surplus of this market. If the government impose a tax on the producers, and the tax rate is $2 per unit produced. What is the deadweight loss? If the government impose a tax on the consumers, and the tax rate is $2 per unit purchased, graphically show the change in the market equilibrium and the...