In relation to producers, consumers and competitive markets, the domestic supply and demand curves for pecan nuts in South Africa at equilibrium are:

Supply: P = 50 + Q

Demand: P = 200 - 2Q

where P is the price in rand per kilogram and Q is the quantity in millions of kilograms.

South Africa is a small producer in the world pecan nut market, where the current price (which will not be affected by anything we currently do) is R60 per kg. However, the South African commodity board is considering imposing a tariff of R40 per kg.

5.1. Find the resulting domestic price and quantity supplied of pecan nuts if the tariff is imposed. Further indicate what quantity, at the world price of R60, will be imported after the imposition of the R40 tariff. (6)

Tip: Start by equating supply and demand to find the equilibrium quantity, then substitute this number into either of the equations to obtain the equilibrium price.

5.2. Interpret the supply and demand diagram of the pecan nut market situation below

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