5. Individual Problems 11-6Consider two similar restaurants in close proximity to each other on either side of the U.S.-Mexico border. Suppose the dollar depreciates against the peso. The following graph shows the supply and demand curves for meals at the restaurant on the Mexican side of the border.On the following graph, shift either the supply curve or the demand curve to represent the effect of the devaluation of the dollar against the peso on the market for meals at the restaurant on the Mexican side of the border. DSPRICE (Pesos)QUANTITY (MEALS)D S The dollar devaluation helps . 5. Individual Problems 11-6Consider two similar restaurants in close proximity to each other on either side of the U.S.-Mexico border. Suppose the dollar depreciates against thepeso. The following graph shows the supply and demand curves for meals at the restaurant on the Mexican side of the border.On the following graph, shift either the supply curve or the demand curve to represent the effect of the devaluation of the dollar against the peso onthe market for meals at the restaurant on the Mexican side of the border.DQUANTITY (MEALS)PRICE (Pesos)

Dollar depreciates against Peso, means Peso appreciates against dollar. This makes US customers of the restaurant require more dollars to be able to have same amount of meal as they did before the depreciation of dollar.Dollar depreciates against Peso, means Peso appreciates against dollar. The restaurant is on the Mexican side of the border. As Peso appreciates against dollar, US customers of the restaurant would now require more dollars to be exchanged for same number of Pesos, so to be able to have lunch at the restaurant. So in terms of dollars the US customers of the Mexican restaurant have to spend more dollars to be able to have the same meal. Thus we can say that the meals became more expensive for US customers. Thus this would cause demand for meals to decline as US consumers will reduce their demand for meals because of depreciation of dollar against Peso. Thus, we will have decline in demand. The demand curve shifts left from D to D' Thus there is decline in quantity of meals and there is also decline in the price of the meals. Numerical example (For clear understanding) Consider $1 = 50 peso and 1 meal costs 50 peso.Before depreciation of Dollar against Peso, US customers paid $1 to 1 meal. After depreciation, $1 = 25 peso and 1 meal costs 50 peso.Now US customers require $2 to have same 1 meal. Thus there is decline in demand. The US customers of restaurant would now find a restaurant on US side of border to have their meals and thus dollar depreciation helps US restaurants.

Answered: 5. Individual Problems 11-6 Consider…

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

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Chapter1: Making Economics Decisions

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5. Individual Problems 11-6

Consider two similar restaurants in close proximity to each other on either side of the U.S.-Mexico border. Suppose the dollar depreciates against the peso. The following graph shows the supply and demand curves for meals at the restaurant on the Mexican side of the border.

On the following graph, shift either the supply curve or the demand curve to represent the effect of the devaluation of the dollar against the peso on the market for meals at the restaurant on the Mexican side of the border.

DSPRICE (Pesos)QUANTITY (MEALS)D S

The dollar devaluation helps .

5. Individual Problems 11-6
Consider two similar restaurants in close proximity to each other on either side of the U.S.-Mexico border. Suppose the dollar depreciates against the
peso. The following graph shows the supply and demand curves for meals at the restaurant on the Mexican side of the border.
On the following graph, shift either the supply curve or the demand curve to represent the effect of the devaluation of the dollar against the peso on
the market for meals at the restaurant on the Mexican side of the border.
D
QUANTITY (MEALS)
PRICE (Pesos)

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