Question

PL P 21. Problem 16 points Suppose Djibouti is a small part of the world market for hockey sticks and the capital is l-spanka a. (7 points) Draw a graph depicting the cuilibrium in the Dibouti hockey stick market in a world without trade, labeling everything, including the couilibrium price & quantity and both consumer & producer surplus. (You may create demand and supply schedules using numbers if you wish but you are not required to do so). Please show how you calculate total surplus here. Total surplus:GS + PS + CS 10 Equilibrium Price DO W2 Equilibrium Quanity b. (12 points) Now, suppose the market is opened to trade, and that the world price is lower than the Djibouti equilibrium price before trade. Will Djibouti be a net importer or exporter of hockey sticks? Draw a graph showing this new equilibrium, including (1) quantity demanded in Djibouti (2) quantity supplied in Djibouti, and (3) imports or exports, plus label anything else relevant. Also show or describe (A) Consumer Surplus and (B) Producer Surplus, and (C) areas that consumers lost or gained and (D) areas that producers lost or gained and (E) areas added to or subtracted from Total Surplus e t ST curve shirted up left ins til at gerts or esportes. el surplus and our subtracted from supply clést or gained and cer Surplus anything else unded in Dior hockey sticke 2) CS, P5 : TS - decreased Djibouti will be a net importer of hockey Sticks Quanity --- New equilibrium --Equilibrium Quanity

Answer 1

1. Refer the attached the picture for the equilibrium quantity and price.

Supply Q Quantity - - - - - 1 Demand o Price

Consumer surplus is the area of triangle below the demand curve and the price curve. It is calculated as follows

CS = -bh

Producer surplus is the area of triangle below the price curve and above the supply curve.

Total surplus = Consumer Surplus + Producer Surplus

B. Refer the attached picture below when world market price is below the price then country will become net importer. Thus, domestic supply will be less and domestic demand will be high.

Demand Price Supply o Consumers Surplus, PS Import ad Supply Q Quantity Domestic

C. Refer the attached picture below

Price Demand Supply Consumer Surplus P tariff - --- ------ 1- -- Producer Surplus Tax Revenue Size of Tariff Societal Loss Societal ¡LOSS --- Pworld ---- Q1 Q2 Q3 Q4 Quantity - - - - - - - - - - - Quantity of Imports (with tariff) -- - Quantity of Imports (without tariff)

Please I have used it just for your reference. Please contact if having any query will be obliged to you for your generous support. Your help mean a lot to me, Please help. Thank you.