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-Please draw the graph and diagram Consider a world with two countries, Canada and Spain, which can produce two goods: wine and cars. Both countries

-Please draw the graph and diagram

Consider a world with two countries, Canada and Spain, which can produce two goods: wine and cars. Both countries have the same preferences, but Canada is relatively more efficient at producing cars and Spain is relatively more efficient at producing wine. Assume that the countries are trading freely with each other.

a: Use the Standard Trade Model to compare the quantities of each good produced and consumed in each country in the free-trade scenario versus a scenario where the two countries cannot trade with each other. Explain.

Use the relative demand-relative supply diagram discussed in Module 5 to analyze the impact on each country's terms of trade of the events listed below. For each of the events, plot the relative demand-relative supply diagram and show in the graph and discuss:

  • The effect of the event each country's relative demand and/or relative supply curves
  • How this effect changes the world relative demand and world relative supply curves
  • The effect on the world relative price
  • The effect on each country's terms of trade

b: Disruptions caused by climate change reduce Spain's productivity in the wine sector. Explain.

c: The price of Chinese cars imported into the EU (of which Spain is a member) decreases by 20%.\

d: All provinces in Canada liberalize their markets of alcoholic beverages and allow international wines to be sold at supermarkets.

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