The focus of this question is on the markets for lobster originated from Australia.

Suppose that Australian lobster suppliers can sell their products in either the domestic market (within Australia) or the export market (lobster sold overseas). With respect to the export market, 93% of Australian lobster exports were sold to China in 2019, according to the Sydney Morning Herald. In early 2020, however, China was gripped by the COVID-19 pandemic, forcing the shutdown of its lobster trade. This means China stopped importing lobster from foreign countries, including Australia.

Required:

a) Considering the shock mentioned above (i.e., China stopped importing lobster from Australia), determine how the demand and supply of Australian lobster in the export market would change. Clearly explain why such change(s) would occur. (1 mark)

b) Lets now focus on the domestic market for Australian lobster (within Australia). Following the shock mentioned above, determine how the demand and supply of Australian lobster in the domestic market would change. Clearly explain why such change(s) would occur. Point out the relevant determinant(s) that affect the demand and supply of Australian lobster in the domestic market. (2 marks)

c) Clearly explain how the equilibrium price and quantity of Australian lobster in the domestic market would change as a result. (1 mark)

d) Suppose that suppliers of Australian lobster in the domestic market refuse to adjust to the new price and insist on selling at the old price instead. What would happen to the domestic market for Australian lobster as a result?