1. Consider an island economy with two products that are transported by a horsedrawn wagon. In the single trading city, there are 60 wagoneers and 60 bankers. For each product, transport cost is 40% of the average cost (and delivered price), and the price elasticity of demand for the product is -2.50. Suppose a mud road is replaced by a turnpike, doubling travel speed and thus cutting in half the number of wagoneers required to handle any given volume of trade. Assume the number of bankers is proportional to the volume of trade.
   1. Illustrate the scenario with an appropriate diagram.(10 marks)