Question

In: Economics

Problem 1. ( JUST NEED PROBLEM 2 SOLVED) Home’s demand curve for wheat is D =...

Problem 1. ( JUST NEED PROBLEM 2 SOLVED)

Home’s demand curve for wheat is

D = 100-20P. Its supply curve is. S = 20 + 20P.

Suppose that Home is a small country.

a. Graph the demand and supply curves.

  1. In the absence of trade, what would the price of wheat be in Home?
  2. The price of wheat in the world market is 1.5. What is the free-trade equilibrium price of wheat in Home?
  3. Determine the amount of domestic production, domestic consumption, and imports of wheat in Home under free trade.

Problem 2

In the example of problem 1, suppose Home imposes a specific tariff of 0.25 on wheat imports.

  1. Determine and graph the effects of the tariff on the price of wheat and the quantity of wheat supplied and demanded in Home.

  1. Determine using a graph the effect of the tariff on the welfare of each of the following groups:
    1. Home import-competing producers; (2) Home consumers; (3) the Home government.

  1. Calculate, using geometric techniques, the consumption distortion loss, the production distortion loss, and the net welfare effect of the tariff.

Solutions

Expert Solution

Answer:

Given that:

Home's demand curve for what s D=100-20P.Its supply is S=20+20P Home is a small country.

a)

Price($) Quantity demanded Quantity suppiled
0.00 100 20
0.50 90 30
1.00 80 40
1.50 70 50
200 60 60
2.50 50 70
3.00 40 80
3.50 30 90
4.00 20 100
4.50 10 110
5.00 0 120

b)

From the above graph, we observe that the demand curve and the supply curve intersect when the price = $2 and the quantity = 60 units

In autarky, the price of wheat in Home = $2

c)

  As it is given that Home is a small country, opening up Home for trade does not affect the world price and the price of wheat in Home would be equal to the world price.

Hence, the price of wheat in Home under free trade = $1.50

d)

  When price of wheat = $1.50, we obtain from the above table that the domestic quantity demanded(Domestic consumption) = 70 units and the domestic quantity supplied(Domestic production) = 50 units

As the domestic quantity demanded is higher than the domestic quantity supplied, the excess demand in Home would be met through imports

Quantity of imports in Home = Excess demand = Domestic quantity demanded - Domestic quantity supplied = 70 - 50 = 20 units


Related Solutions

Home’s demand curve for wheat is: D = 100 - 20P. Its supply curve is: S...
Home’s demand curve for wheat is: D = 100 - 20P. Its supply curve is: S = 20 + 20P. a) Derive and graph Home’s import demand schedule. What would be the price of wheat and quantity sold in Home in the absence of trade? Now add Foreign, which has a demand curve: D* = 80 -20P and a supply curve S* = 40 + 20P. b) Derive and graph Foreign’s export supply curve and find the price of wheat...
Home’s demand curve for wheat is D= 80 – 2P and its supply curve is S=...
Home’s demand curve for wheat is D= 80 – 2P and its supply curve is S= 2P - 20. Foreign’s demand curve for wheat is D*= 80– 4P* and its supply curve is S*= 6P*- 30. You should very carefully draw each demand and supply curve, since your answers below must be reasonably close to correct. A small featureless graph will not be sufficient. Now suppose Home imposes a quota of 20 on wheat imports. Quota rights are given to...
Home’s demand curve for wheat is D = 100-20P. Its supply curve is S = 20...
Home’s demand curve for wheat is D = 100-20P. Its supply curve is S = 20 + 20P. Suppose that Home is a small country. a. Graph the demand and supply curves. b. In the absence of trade, what would the price of wheat be in Home? c. The price of wheat in the world market is 1.5. What is the free-trade equilibrium price of wheat in Home? d. Determine the amount of domestic production, domestic consumption, and imports of...
Home’s demand curve for bananas is D = 100 – 2P and its supply curve for...
Home’s demand curve for bananas is D = 100 – 2P and its supply curve for bananas is S = 20 + 2P. Home is one of the largest banana importers in the world. When trade opens up, Home’s import demand curve is MD = 90 – 5P and it faces an export supply curve given by XS = 5P – 10. (6) A) With free trade, determine the equilibrium price and trade volume B)) Now Home imposes an ad...
Suppose that the demand curve for wheat is D ( p ) = 120 − 10...
Suppose that the demand curve for wheat is D ( p ) = 120 − 10 p , and the supply curve is S ( p ) = 10 p . The government imposes a price floor of $8 per unit. 1. Draw a clearly marked graph to illustrate the demand, supply, competitive equilibrium point (without government intervention), and the price floor. 2. Compute the equilibrium price and quantity after the price floor and interpret the results. 3. Explain who...
Assume that there are two countries in the world: Home and Foreign. Home’s demand curve for...
Assume that there are two countries in the world: Home and Foreign. Home’s demand curve for wheat is D = 125 - 25P and supply curve is S = 20 + 40P. Suppose that Foreign is a much larger country, with domestic demand D* = 1100 - 300P and supply S* = 650 + 200P. a) What would the price of wheat be in case of no trade in Home? b) What would the price of wheat be in case...
2.         The inverse demand curve for wheat is p = 10 – 0.10Q and the inverse...
2.         The inverse demand curve for wheat is p = 10 – 0.10Q and the inverse supply curve is p = 0.40Q, where p = dollars per bushel and Q is billions of bushels of wheat. Wheat is bought and sold in a perfectly competitive market. a.         Provide a graph of the market for wheat and calculate and show the equilibrium price and quantity (in billions of bushels) in the market. b.         If the government provides a price support of...
2. Consider an inverse demand curve and inverse supply curve given by Q D = 52,...
2. Consider an inverse demand curve and inverse supply curve given by Q D = 52, 000 − 200P Q S = −8, 000 + 400P a. Find equilibrium price. b. Find equilibrium price. c. Now solve for producer surplus at equilibrium. Show your work! HINT: You will need to know find what price is when the supply curve crosses the y-axis. d. And do the same for consumer surplus at equilibrium. Show your work! e. What if the government...
Suppose that the demand curve for wheat is Q= 120-10p and the supply curve is Q=10p...
Suppose that the demand curve for wheat is Q= 120-10p and the supply curve is Q=10p The government imposes a price ceiling p =$ 3 per unit. a. How do the equilibrium price and quantity​ change? ​(round quantities to the nearest integer and round prices to the nearest​ penny) The equilibrium quantity without the price ceiling is 60 and the price without the price ceiling is ​$6. The equilibrium quantity with the price ceiling is 30. b. What effect does...
Elasticity of demand curve 1 = - 0.5 Elasticity of demand curve 2 = - 2.5...
Elasticity of demand curve 1 = - 0.5 Elasticity of demand curve 2 = - 2.5 Elasticity of demand curve 3 = - 0.2 Which of the following provides the greatest moral hazard potential? Group of answer choices all provides identical levels of moral hazard D2 D3 D1
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT