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,the quantity of jeans demanded domestically equals __________,and when this economy opens to trade,the quantity of jeans demanded domestically equals __________.

Question

Quizplus · Accepted Answer

To find the equilibrium quantity of jeans demanded domestically, we need to set the demand equal to the domestic supply:
100 - 0.6P = 20 + 0.4P
Solving for P, we get P = $50.
Substituting P back into either the demand or the supply function gives us the equilibrium quantity of jeans: Q = 52.

When the economy opens to trade, the domestic price will adjust to the world price of $30. At this price, the domestic quantity demanded is:
100 - 0.6(30) = 82.
Therefore, the quantity of jeans demanded domestically increases from 52 to 82 when the economy opens to trade. Thus, the correct answer is (C) 52;82.

The Demand for Jeans in a Country Is Given by D