The domestic demand and supply for sugar are Q^d = 700 − 2P and Q^SD = 100 + 4P.The foreign supply is Q^SF = 150 + 3P.Suppose an import quota of 100 is imposed in the domestic market.What will be the new market price of sugar?

Question

Quizplus · Accepted Answer

After imposing an import quota of 100, the domestic supply curve will become Q^SD = 600 − 2P. At the same time, the total supply in the market will be the sum of domestic supply and the import quota, i.e., QTotal = Q^SD + 100 = 700 − 2P. The foreign supply curve is irrelevant now since it cannot exceed the import quota. The new equilibrium occurs at the intersection of the new domestic supply and the total demand curve, which is: 700 − 2P = 700 − P + 100 P = 62.50 Therefore, the new market price of sugar is $62.50.

The Domestic Demand and Supply for Sugar Are Qd =

The Domestic Demand and Supply for Sugar Are Q^d =