Suppose that research finds a link between high fructose corn syrup (HFCS) and obesity, which then leads American consumers to switch from HCFS products to pure cane sugar products. The graphs below show the markets for cane sugar in Haiti and the U.S. before the studies were divulged. Shift the curves in the graphs, including the horizontal World Price curve, to describe the new trade equilibrium that results after the switch in preferences of American households, and then answer the follow-up question. Assume that the U.S. and Haiti are the only non-HFCS sugar trading parties in the world and that there are no quotas, subsidies, or tariffs distorting these markets. United States Haiti Price ($) 8 7 co 10 2 1 Domestic Supply World Price Domestic Demand Price ($) 40 w 2 1 Domestic Supply 0 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Quantity (thousands of pounds) According to your answer above, at the new equilibrium: Cane sugar producers in Haiti benefited. Cane sugar producers in the U.S. are worse off. All Haitian cane sugar consumers benefited. World Price Domestic Demand 0 0 1 2 3 4 5 6 7 8 9 10111213141516 17 18 19 20 Quantity (thousands of pounds) Incorrect. Will American consumers be demanding more or less cane sugar at each price?
Suppose that research finds a link between high fructose corn syrup (HFCS) and obesity, which then leads American consumers to switch from HCFS products to pure cane sugar products. The graphs below show the markets for cane sugar in Haiti and the U.S. before the studies were divulged. Shift the curves in the graphs, including the horizontal World Price curve, to describe the new trade equilibrium that results after the switch in preferences of American households, and then answer the follow-up question. Assume that the U.S. and Haiti are the only non-HFCS sugar trading parties in the world and that there are no quotas, subsidies, or tariffs distorting these markets. United States Haiti Price ($) 8 7 co 10 2 1 Domestic Supply World Price Domestic Demand Price ($) 40 w 2 1 Domestic Supply 0 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Quantity (thousands of pounds) According to your answer above, at the new equilibrium: Cane sugar producers in Haiti benefited. Cane sugar producers in the U.S. are worse off. All Haitian cane sugar consumers benefited. World Price Domestic Demand 0 0 1 2 3 4 5 6 7 8 9 10111213141516 17 18 19 20 Quantity (thousands of pounds) Incorrect. Will American consumers be demanding more or less cane sugar at each price?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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