Question

Suppose that the North American Free Trade Agreement (NAFTA) resulted in a single large market for wheat instead of three separate markets in Canada, the United States, and Mexico. The demand schedule below shows the number, In billions, of bushels of wheat demanded per year by each country at four different prices per bushel.

Complete the demand schedule for wheat by solving for the quantity of wheat demanded in the new North American market. U.S. Mexico North American Market.

Price Canada U.S Mexico North Americain market
$10 6 25 5
8 9 28 7
6 11 32 9
4 13 35 12

Answer 1

North American Free Trade Agreement (NAFTA)

Demand Schedule for Wheat in the new North American Market

(Number in billions of bushels of wheat, demanded per year)

Price Canada U.S Mexico North American market

$10 6 25 5 36

8 9 28 7 44

6 11 32 9 52

4 13 35 12 60

Step-by-step explanation:

a) Data and Calculations:

Demand Schedule (number in billions of bushels of wheat)

Price Canada U.S Mexico North American market

$10 6 25 5 36

8 9 28 7 44

6 11 32 9 52

4 13 35 12 60

b) The result shows the aggregate demand of bushels of wheat in the three markets when they become a single market. This large market size will encourage wheat farmers to produce and supply more wheat and even reduce the price to $4 per bushel in order to reach the equilibrium demand of 60 billion bushels of wheat per year. This huge market will engender economic growth in the market for wheat and its related industries.