Question
Asap please Suppose the demand in the poor country is P=100- 4Q and supply is P=Q. Draw country B's demand and supply diagram in autarky
Asap please
Suppose the demand in the poor country is P=100- 4Q and supply is P=Q. Draw country B's demand and supply diagram in autarky with the standard axes (P vertical, Q horizontal). Mark carefully on the diagram the demand curve (1 mark), the supply curve (1 mark), and then work out the equilibrium (show working out and the numbers, not just the point) (1 mark). How large is welfare under autarky (2 marks)?
Suppose now that country B can also trade freely. Add on the previous diagram from Question 3 a world price of 45 (1 mark); explain why no goods will be bought or sold at the autarky price (1 mark); how much is demanded at price 45? (0.5 marks); how much is supplied (0.5 marks); explain what happens to the difference between supply and demand at that price (1 mark). How large is welfare under free trade (2 marks)?
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