Consider the market for coffee in the small, isolated country of Krakozhia. Within Krakozhia, the domestic demand for coffee is:\[ Q^d = 500 - 2p \]and the domestic supply of coffee is:\[ Q^s = -150 + 3p \] (g) Suppose Krakozhia is open to trade and the world price is 80. Determine the domestic quantity supplied, domestic quantity demanded, and the quantity imported.(h) Draw a graph showing the domestic supply and demand and world price from (g). Label all axes and curves and mark out intercepts and relevant values. Shade and label areas for the consumer and producer surplus.(i) Calculate the consumer, producer, and total surplus from (g). Who is made better off and who is made worse off by trade?

Answered: (g) Suppose Krakozhia is open to trade…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Consider the market for coffee in the small, isolated country of Krakozhia. Within Krakozhia, the domestic demand for coffee is:

\[ Q^d = 500 - 2p \]

and the domestic supply of coffee is:

\[ Q^s = -150 + 3p \]

(g) Suppose Krakozhia is open to trade and the world price is 80. Determine the domestic quantity supplied, domestic quantity demanded, and the quantity imported.

(h) Draw a graph showing the domestic supply and demand and world price from (g). Label all axes and curves and mark out intercepts and relevant values. Shade and label areas for the consumer and producer surplus.

(i) Calculate the consumer, producer, and total surplus from (g). Who is made better off and who is made worse off by trade?

Expert Solution

Introduction

Here we are given the demand and supply curve for coffee in the domestic economy. Where there is an equilibrium quantity and price. And now the imports are allowed and the world price for coffee is $80. Lets see how it affects the domestic market for coffee.

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