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This is a problem set for 'International Trade' course. There are two problems with 4~5 small questions included.

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This is a problem set for 'International Trade' course. There are two problems with 4~5 small questions included.
Answered 1 days After Jun 26, 2022

Solution

Komalavalli answered on Jun 27 2022
64 Votes
6.
a)
    Price
    DH
    0
    18
    5
    16.75
    10
    15.5
    15
    14.25
    20
    13
    25
    11.75
    30
    10.5
    35
    9.25
    40
    8
    45
    6.75
    50
    5.5
    55
    4.25
    60
    3
    65
    1.75
    70
    0.5
    
)
Free trade equili
ium where DH (home country demand equation ) equals QF-DF(export supply equation)
18-0.25P = -10+P
28 = 1.25P
P = 28/1.25
P = 22.4
P=22 approximately
Substituting this P in home country demand equation
DH = 18-0.25*22.4
DH = 18-4
DH = 14
Total home country’s demand is 14 units
We will find the international supply by substituting P in supply equation
-10+22 = 12
Quantity of international supply is 12
Quantity of home country supply at P = 22
QH = -2+0.25*22
QH= -2+5.5
QH = 3
Imports = Home country quantity demand – quantity of home supply
Imports = 14-3
Imports =11 units
c)
With tariff international supply equation will be -10+P+7=-3+P
18-0.25P = -3+P
21 = 1.25P
P =21/1.25
P = 17 approximately
Substituting this P in home country demand equation
DH = 18-0.25*17
DH = 18-4.25
DH = 14
Total home country’s demand is 14 units
We will find the international supply by substituting P in supply equation
-3+17 = 14
Quantity of international supply is 14
Quantity of home country supply at P = 17
QH = -2+0.25*17
QH=...
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