:PARTIAL EQUILIBRIUM MODEL

HOME: DemandP = 100 - QFOREIGNDemand P = 200 - 1/3 Q

Supply P = QSupply P =1/3 Q

(3 points)(a)Derive and depict in a figure the World Excess Supply and Demand Curves.Be specific about intercepts and slopes. Label fully.

(2 points)(b)Determine world prices in free trade.Show your work.Also, check your work.

(5 points)(c)Show (graphically and mathematically) that HOME Gains From Trade relative to Autarchy.Recall SS = CS + PS.Be sure to show SS in Autarchy and in FT. Explain the basis for the gains.

(3 points)(d)Now suppose HOME has a rise in SUPPLY (eg Demand P = 1/6 Q).What is the impact on world prices?Show your work and provide the intuition.

(4 points)(e)How does HOME'S change in supply affect HOME Welfare relative to Free Trade? Give the intuition. Eg, discuss CS, PS, and SS in detail.Show your work and provide the intuition.

(3 points)(f)How does HOME'S change in supply affect FOREIGN Welfare relative to Free Trade? Show your work and provide the intuition.