When graphing a market, one of the key aspects to remember is that equilibrium occurs where supply equals demand. Therefore, you can find the equilibrium price and quantity by setting the supply and demand equations equal to one another. In this case, since domestic demand is P = 11.5 - Q and domestic supply is P = 5.5 + Q, you can find the equilibrium quantity as 11.5 – Q = 5.5 + Q. Solving for Q, you get 2Q = 6 or Q = 3 (which in this case equates then to 300 million bushels). Plugging that answer back into either the supply or demand equation, you find the equilibrium price (which is 8.5 or 85 yuan) or Rent in this case). This is the equilibrium point with no trade. With the application of the world price and then the world price plus tariff, you just need to plug the established prices (6.5 for world price, 6.5 + 1.5 for the tariff) into the supply and demand equations to find the quantity supplied and the quantity demanded with or without the tariff. Recently, China placed tariffs on the importation of US soybeans. Assume that the domestic market for soybeans in China is described by the following equations: Demand: P = 11.5 – Q Supply: P = 5.5 + Q Where P is 10 Yuan (¥) per bushel of soybeans and Q is 100 million bushels per year. The world price for soybeans is ¥65/bushel (this would graph as 6.5). Graph the soybean market in China showing equilibrium both with no barriers to trade and with a ¥15/bushel tariff. Be sure to fully and clearly label the graph including: Domestic Demand curve (D), Domestic Supply curve (S), the World Price (WP), and the Price with tariffs (PT). Based on your graph, what is the maximum number of soybeans will China import from the US if there are no tariffs? How many bushels with the imposed tariff? Who are the greatest benefactors of China’s tariff on US soybeans?
When graphing a market, one of the key aspects to remember is that equilibrium occurs where supply equals
With the application of the world price and then the world price plus tariff, you just need to plug the established prices (6.5 for world price, 6.5 + 1.5 for the tariff) into the supply and demand equations to find the quantity supplied and the quantity demanded with or without the tariff.
Recently, China placed tariffs on the importation of US soybeans. Assume that the domestic market for soybeans in China is described by the following equations:
Demand: P = 11.5 – Q Supply: P = 5.5 + Q
Where P is 10 Yuan (¥) per bushel of soybeans and Q is 100 million bushels per year.
The world price for soybeans is ¥65/bushel (this would graph as 6.5). Graph the soybean market in China showing equilibrium both with no barriers to trade and with a ¥15/bushel tariff. Be sure to fully and clearly label the graph including: Domestic Demand curve (D), Domestic Supply curve (S), the World Price (WP), and the Price with tariffs (PT).
Based on your graph, what is the maximum number of soybeans will China import from the US if there are no tariffs? How many bushels with the imposed tariff?
Who are the greatest benefactors of China’s tariff on US soybeans?
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