Question
In contrast to strawberries, Canada is a major exporter of wheat. Canada's demand (QDCDN) and supply (QSCDN) of wheat is given respectively by QDCDN= 400
In contrast to strawberries, Canada is a major exporter of wheat. Canada's demand (QDCDN) and supply (QSCDN) of wheat is given respectively by QDCDN= 400 - 25PCDN and QSCDN = 100 + 5PCDN
Where P is the price per bushel of wheat.
a)Derive the excess supply curve of wheat for Canada. (3 marks)
Excess supply = QSCDN - QDCDN = 100 + 5PCDN - (400 - 25PCDN) = 100 + 5PCDN - 400 + 25PCDN
So, Excess supply, ES = 30PCDN - 300
b)What will be the price at which Canada does not export wheat? (3 marks)
Canada does not export wheat when ES = 0.
So, 30PCDN - 300 = 0
So, 30PCDN = 300
So, PCDN = 300/30 = 10
The price at which Canada does not export wheat is 10.
c)China is the major importer of Canadian wheat. Its demand (QDH) and supply(QSH) for wheat is given respectively by
QDH= 600 - 10PH and QSH= 200 + 10PH Derive the excess demand curve for wheat in China. (3 marks).
Excess demand, ED = QDH - QSH = 600 - 10PH - (200 + 10PH) = 600 - 10PH - 200 - 10PH
So, ED = 400 - 20PH
d)What would wheat price be in China in the absence of trade? (3 marks)
In the absence of trade, ED = 0
So, 400 - 20PH = 0
So, 20PH = 400
So, PH = 400/20
So, PH = 20
e)If Canada and China are allowed to trade with one another, what will be the price and the volume of trade?
f)The trade war has heated up and China imposes a tariff of 2.5 per bushel.Determine the effect of the tariff on: (1) the price of wheat in each country, (2) the quantity of wheat produced and consumed in each country, and (3) the volume of trade.
g)Properly label to illustrate the excess demand for China and excess supply curve for Canada on the same graph with free trade and with the import tariff of $2.5 imposed.
need help for e f and g pls explain steps too!
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