The Scenario :

Suppose that the market for good X is small in Malaysia and in Thailand , relative to the world market for good X . Both these markets are currently open to free trade . Suppose also that , relative to the rest of the world , Malaysia has a comparative advantage in producing good X whilst Thailand has a comparative disadvantage in producing good X. Malaysian consider good X a normal good , whereas Thais consider good X an inferior good .

The Question :

Using a set of appropriate diagrams ( with demand and supply curves ) , show the comparison between the Malaysian and Thai markets for good X (side by side) - when an economic recession hits both Malaysia and Thailand simultaneously . Explain what happens to the price of good X in each country , as well as the quantity demanded , quantity supplied , and quantity imported/exported . make sure that you include welfare tables and briefly explain the welfare effects on consumers , producers and society as a whole - for each country, as a result of the economic downturn.