(1) Home's demand curve for books is D=50-10P, It's supply curve is S=10+10P.

Derive and graph Home's import demand schedule. What would the price of books be in the absence of trade?

Now add Foreign, which has a demand curve D*=60-10P and a supply curve S*=20+10P.

(2)

a. Derive and graph Foreign's export supply curve and find the price of books that would prevail in Foreign in the absence of trade.

b. Now allow Foreign and Home to tade with each other, at zero transportation cost. Find and graph the equilibrium under the free trade. What is the world price? What is the volume of tarde?

*You are asked to derive and graph the import demand (IM) and export supply (XS) curves, as well as finding and graphing the world equilibrium under free trade.