Below is a graph illustrating the market for mustard seeds in Rysen III.(Sd is domestic supply,and Dd is domestic demand. ).The world price of mustard seeds is $100.

-Refer to the graph above to answer this question.Suppose that the government introduces a quota of 400 on imports of mustard seeds,what will be the new price?

Question

Below is a graph illustrating the market for mustard seeds in Rysen III.(Sd is domestic supply,and Dd is domestic demand. ).The world price of mustard seeds is $100.
 
-Refer to the graph above to answer this question.Suppose that the government introduces a quota of 400 on imports of mustard seeds,what will be the new price?

Quizplus · Accepted Answer

If the government introduces a quota of 400 on imports of mustard seeds, it will restrict the quantity of imports to 400. The new demand curve for mustard seeds in Rysen III will be the domestic demand plus the quota (Dd+Q), which will intersect the world price (Pw) at point E. The quantity demanded will be 1200-400=800, and the quantity supplied domestically will be 600. At point E, the price will be $120. Therefore, the new price of mustard seeds will be $120.

Below Is a Graph Illustrating the Market for Mustard Seeds