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Which country has a comparative advantage in producing shoes? With international trade, explain which country would export shoes and how the price of shoes in the importing country and the quantity produced by the importing country would change. Explain which country gains from this trade.

Which country has a comparative advantage in producing shoes? With international trade, explain which country would export shoes and how the price of shoes in the importing country and the quantity produced by the importing country would change. Explain which country gains from this trade.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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The figure shows the markets for shoes if there is no trade between the United States and Brazil.

  1. Which country has a comparative advantage in producing shoes?
  2. With international trade, explain which country would export shoes and how the price of shoes in the importing country and the quantity produced by the importing country would change.
  3. Explain which country gains from this trade.
The image consists of two graphs, each titled "Price (dollars per pair)" on the vertical axis and "Quantity (millions of pairs per year)" on the horizontal axis. ### Graph on the Left: - **Supply and Demand Lines:** The graph displays a typical supply and demand curve. - The **Supply (S)** curve slopes upward from left to right, indicating that as prices increase, the quantity supplied increases. - The **Demand (D)** curve slopes downward from left to right, showing that as prices decrease, the quantity demanded increases. - **Equilibrium Point:** The intersection of the supply and demand curves is labeled as the equilibrium point, where the quantity supplied equals the quantity demanded. - **Axes:** - The vertical axis ranges from 0 to 50 dollars per pair. - The horizontal axis ranges from 0 to 10 million pairs per year. ### Graph on the Right: - **Shift in Demand:** - The **Supply (S)** curve remains unchanged, sloping upward. - The **Demand (D)** curve has shifted to the left, indicating a decrease in demand at each price level. - **New Equilibrium Point:** This shift results in a new intersection point lower than the original equilibrium, representing a lower quantity and price at equilibrium. - **Axes:** - The vertical axis ranges from 0 to 50 dollars per pair. - The horizontal axis ranges from 0 to 5 million pairs per year. This image illustrates the basic economics concept of supply and demand, demonstrating how shifts in demand can affect equilibrium price and quantity in a market.
Transcribed Image Text:The image consists of two graphs, each titled "Price (dollars per pair)" on the vertical axis and "Quantity (millions of pairs per year)" on the horizontal axis. ### Graph on the Left: - **Supply and Demand Lines:** The graph displays a typical supply and demand curve. - The **Supply (S)** curve slopes upward from left to right, indicating that as prices increase, the quantity supplied increases. - The **Demand (D)** curve slopes downward from left to right, showing that as prices decrease, the quantity demanded increases. - **Equilibrium Point:** The intersection of the supply and demand curves is labeled as the equilibrium point, where the quantity supplied equals the quantity demanded. - **Axes:** - The vertical axis ranges from 0 to 50 dollars per pair. - The horizontal axis ranges from 0 to 10 million pairs per year. ### Graph on the Right: - **Shift in Demand:** - The **Supply (S)** curve remains unchanged, sloping upward. - The **Demand (D)** curve has shifted to the left, indicating a decrease in demand at each price level. - **New Equilibrium Point:** This shift results in a new intersection point lower than the original equilibrium, representing a lower quantity and price at equilibrium. - **Axes:** - The vertical axis ranges from 0 to 50 dollars per pair. - The horizontal axis ranges from 0 to 5 million pairs per year. This image illustrates the basic economics concept of supply and demand, demonstrating how shifts in demand can affect equilibrium price and quantity in a market.
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