Question 1. Suppose that demand for wheat in country X is of the form: D = 100 - 20P and the supply function S = 20 + 20P.
1. Determine the type of function of demand for imports in country X, draw a curve of demand for imports. What will be the price of wheat in the absence of foreign trade.
Consider now the country Y, the function of demand for wheat which has the form: D '= 80 - 20P and the supply function S' = 40 + 20P.
2. Determine the type of function export supply in the country and draw a curve Y export supply. What will be the price of wheat in the country Y in the absence of foreign trade?
3. Suppose now that country X and Y are trading with each other, the transportation costs are zero. At what level to set a world price of wheat? What will be the trade volume?
Question 2. South Korea exports mainly manufactured goods and imports of oil and raw materials for the food industry. Analyze the impact on trading conditions in South Korea the following events:
1. Gulf War leads to a reduction in the supply of oil on the world market;
2. Japan is expanding the export of cars in Canada and the United States;
3. FSU observed poor harvest crops;
4. The South Korean government reduced customs duties on imports of beef and citrus fruits.