Question

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b. Tf Alice had an injury that reduced her coconut production rate to two hours per coconut, who would have the absolute advantage in each good? Who would have the comparative advantage in each good? Would gains from trade still be possible! 2. Describe the effects of the following scenarios on the price and quantity of silk scarves in a market using supply-and-demand diagrams. a. A disease is killing the silkworm population. b. A very unpopular celebrity starts wearing silk scarves all the time, causing many to change their habits to avoid being compared to her. c. Changes in the climate create longer, colder winters and milder summers.

Answer 1

the silkwoms killing la) A disease that is population wsuld affect the supply of Silk scaries. Because silkwarms Decestary are for silk production and silk is the teaw material for silk the scarves, सायण किचजीन fall fof the scarier). This woud cause lefteward shift 1n the at shown in fgwre foln- apy जिंबर curve auantily from the figure tat supply sshifte to s and at a quantity fall from @ to ♡' and lee can ree yelult Cuire from P to p Thur, price Hise and quantity All in thie seenario. (6) Since a kery enpopular rolebity Starts cuearing the SlarnoR, would change against the consumers habt scarier. means that they would demand This lecs of thee silk scayer.

Thus, oemand cuOve would shift leftwrds due to fallin demrd as shewn below - Pruce Quantity Ibus, we can see that pru ce falls from P to P' aud quantity falls to O'. Thus, in this scenario falls- both quantife and pUce 10) If the winterp fecome longer and colder, peple woudd need mare olemand for the sick scarrop Col@ubl well. So the clemand curro cuould shift fcaner and therefre the increale in the demand onghtwards duie to P. as Shown- As a grerult of the rightuard shift hoth pnce to pi8o' Jreypechrely. and quantity in thes scenaio.
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