The demand for jeans in a country is given by D = 100 - 0.6P,where P is the price of a pair of jeans.Supply by domestic producers is given by S = 20 + 0.4P.The world price of a pair of jeans equals $30.In equilibrium,when this economy is closed to trade,domestic jeans production equals _________,and when this economy opens to trade,domestic jeans production equals __________.

Question

Quizplus · Accepted Answer

In a closed economy, set D = S: 100 - 0.6P = 20 + 0.4P, solving gives P = 80, and domestic production is S = 20 + 0.4(80) = 52. When open to trade, the price is $30, so domestic production is S = 20 + 0.4(30) = 32.

The Demand for Jeans in a Country Is Given by D