Question
Consider the following trade situation: The U.S. demand for imports of maple syrup from Canada is QD = 21-P The supply of maple syrup to
Consider the following trade situation:
The U.S. demand for imports of maple syrup from Canada is QD = 21-P
The supply of maple syrup to the United States from Canada is QS = 7 + P
The units are million boxes and U.S. dollars per boxOne U.S. dollar buys 10 Canadian dollars
Draw a graph showing clearly the quantity of US imports of maple syrup from Canada and their price in US dollars.[Insert an image of your graph here]
There is free trade in maple syrup (no tariffs or quotas on imports from Canada), but the Canadian dollar (CAD) increases in value against the US dollar (USD), so that one USD only buys 5 CAD. The cost of maple syrup for the U.S. consumer is now double what it was in the base case for each quantity imported. In the table below show the quantity of imports supplied at various prices before (from the equation above) and after the change in the currency values..
2Draw a graph of the problem in U.S. dollars, showing clearly the price that U.S. importers (the buyers) pay and the quantity of trade that will occur.
[Insert an image of your graph here]
What is the equation for the new supply curve?
How has the change in currency values affected the shape of the supply curve?
How has it affected the responsiveness of Canadian maple syrup supply to changes in US prices?
What is the price of maple syrup in CAD before and after the change in the value of the Canadian dollar?
What is the price in US dollars before and after the change?
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