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Free trade at world price and the quantity of imports.

Suppose that the domestic demand and supply for hats in a small open economy are given by:

Q = 80 - 2P (demand)

Q = 20 + 2P (supply)

Where Q denotes quantity and P denotes price.

The world price is $9. If this nation opens its market to free trade, illustrate what is the quantity demanded, quantity supplied and the quantity of imports? Show your calculations for full credit. Add these values to your graph from part a, show the new graph below:

Business Economics, Economics

  • Category:- Business Economics
  • Reference No.:- M919669

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