Consider a world consisting of two countries, Ghana and Canada. Suppose the domestic demand and-supply curves for bicycle in Ghana are given by the following equations:

Demand: P = 80 - 2Q

Supply: P =5 + 3Q

Now assume that due to technical advancement in Canada the price of bicycle fall by 25%. If free trade according to comparative advantage were allowed, what will be the price of bicycles in Ghana? How much of bicycles would be produced in Ghana? How much will be consumed in Ghana? And how much will be imported from Canada?

Will retain at 50 in Ghana to meet the equilibrium quantity.

Demand Ghana will produce 75

Consumption in Ghana (4122) =206

Imports206 - 75 =131

(1.) Based on the information given what are the values of consumer and producer surplus in Ghana?