08 Jun Question 13) Table 3.8 Illustrates the supply an
Question
13) Table 3.8 Illustrates the supply and demand schedules for calculators in Sweden
and Norway. On graph paper, draw the supply and demand schedules for each country.
Table 3.8 – Supply and Demand Schedules for Calculators
Sweden
Norway
Price
Qty S
Qty D
Price
Qty S
0
0
1200
0
5
200
1000
5
10
400
800
10
15
600
600
15
0
20
800
400
20
200
25
1000
200
25
400
30
1200
0
30
600
35
1400
35
800
40
1600
40
1000
45
1800
45
1200
Qty D
1800
1600
1400
1200
1000
800
600
400
200
0
Sweden
Norway
50
50
45
45
40
40
35
35
30
30
Qty S
Qty D
25
20
Qty S
Qty D
25
20
15
15
10
10
5
5
0
0
0
200
400
600
800 1000 1200 1400 1600 1800 2000
0
200
400
a)
In the absence of trade, what are the equilibrium price and quantity of calculators
produced in Sweden and Norway? Which country has the comparative advantage in calculators?
Sweden’s equilibrium price is $15 and their equilibrium quantity is 600.
Norway’s equilibrium price is $30 and their equilibrium quantity is 600.
Sweden has the comparative advantage due to it’s lower price.
b)
Assume there are no transportation costs. With trade, what price brings about balance
in exports and imports? How many calculators are traded at this price? How many
calculators are produced and consumed in each country with trade?
c)
Suppose the cost of transporting each calculator from Sweden to Norway is $5. With trade,
what is the impact of the transportation cost on the price of calculators in Sweden and Norway?
How many calculators will each country produce, consume, and trade?
600
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