Question

Benefits of Trade 2020 With Producer and Consumer Surplus Assume a world with only two countries (country A and country B). Previously, the countries had closed economies. But now they decide to trade widgets. The supply and demand equations are given below. Country A Country B World QDA = 100-10P QDB = 160-20P QDW = 260-30p QSA= 40+10P QSB = -60+20P QSW = 100+30p World demand=QdA+QdB=100-10p+160-20p=260-30p World supply=QSA+QsB=-40+10p-60+20p=-100+30p World equilibrium is at where world demand Equal to world supply. 260-30p=-100+30p 360=60p P=360/60=6 World EQUILIBRIUM QUANTITY=260-30*6=80|| QdA=100-10*6=40. ,QSA=-40+10*6=20 Country A will import 20 units. QdB=160-20*6=40. QsB=-60+20*6=60 Country B will export 20 units. Find the equilibrium price and quantity for the world, and then fill in the table below with results after trade in widgets has taken place. World Country A Country B na Ends up producing more or less Ends up consuming na more or less na Ends up with a higher or lower price Quantity Demanded Quantity Supplied Imports of widgets na 1,429 words

Answer 1

Apart from what you have already done, you also need to solve for equilibriums in country A and country B with just their own demand and supply functions. So the complete answer will be:

Country A
QDA = QSA
100 - 10P = -40 + 10P
20P = 140
P = 7
Q = 100 - 10P = 100 - 70 = 30
Country B
QDB = QSB
160 - 20P = -60 + 20P
40P = 220
P = 5.5
Q = 160 - 20P = 50
World (as already solved by you)
P = 6
Q = 80
	World	Country A	Country B
Ends up producing more or less	NA	Less (alone 30, as part of world 20)	More (alone 50, as part of world 60)
Ends up consuming more or less	NA	More (alone 30, as part of world 40)	Less (alone 50, as part of world 40)
Ends up with a higher or lower price	NA	Lower (7 alone, 6 as part of world)	Higher (5.5 alone, 6 as part of world)
Qty demanded	80	40	40
Qty supplied	80	20	60
Imports	NA	20	-20