Question

Assume two countries, Thailand (T) and Japan (J), have one good: cameras. The demand (d) and supply (s) for cameras in Thailand and Japan is described by the following functions:

a. True
b. False

Answer 1

The equilibrium price and quantity in Thailand is 32.5 Baht and 27.5 units, respectively. Under free trade with a set price of 56.36 Baht, Thailand exports cameras because its supply exceeds domestic demand, while Japan imports cameras to meet its higher demand.

Step-by-step explanation:

The equilibrium price and quantity for cameras in Thailand and Japan can be found by setting the demand and supply functions equal to each other. For Thailand (T), we have two functions:
QdT = 60 - P (demand)
QsT = -5 + P (supply),
and for Japan (J), we have:
QdJ = 80 - P (demand).

To find the equilibrium, we equate demand and supply:
For Thailand: 60 - P = -5 + P ⇒ 2P = 65 ⇒ PT = 32.5,
Substituting PT into the demand or supply function gives us QT = 60 - 32.5 = 27.5.

Under free trade, the free-trade price is set to 56.36 Baht. Thailand's supply at this price is QsT = -5 + 56.36 = 51.36, and its demand is QdT = 60 - 56.36 = 3.64. Since supply is greater than demand, Thailand will export cameras. Japan's demand at this price is QdJ = 80 - 56.36 = 23.64, which means Japan will need to import cameras since Japan's supply function is not given but we assume it cannot meet its own demand at this price.