Question

Suppose that the supply schedule of Maine lobsters is as follows: Price of lobster (per pound) $25 Quantity of lobster supplied (pounds) 800 20 700 15 600 10 500 5 400 Suppose that Maine lobsters can be sold only in the United States. The U.S. demand schedule for Maine lobsters is as follows: Price of lobster (per pound) $25 Quantity of lobster demanded (pounds) 200 20 400 600 15 10 800 5 1,000 a. Draw the demand curve and the supply curve for Maine lobsters. What are the equilibrium price and quantity of lobsters? Now suppose that Maine lobsters can be sold in France. The French demand schedule for Maine lobsters is as follows: Price of lobster (per pound) $25 Quantity of lobster demanded (pounds) 100 20 300 15 500 700 10 5 900 b. What is the demand schedule for Maine lobsters now that French consumers can also buy them? Draw a supply and demand diagram that illustrates the new equilibrium price and quantity of lobsters. What will happen to the price at which fishermen can sell lobster? What will happen to the price paid by U.S. consumers? What will happen to the quantity consumed by U.S. consumers?

Answer 1

a.
To draw the demand and supply curve, we need to plot the points provided in the respective tables.

Demand curve:

Price (per pound) Quantity demanded (pounds)
25 200
20 400
15 600
10 800
5 1,000
Supply curve:

Price (per pound) Quantity supplied (pounds)
25 800
20 700
15 600
10 500
5 400
The equilibrium price and quantity can be found where the supply and demand curves intersect. From the graph, we can see that the equilibrium price is $15 per pound and the equilibrium quantity is 600 pounds of lobster.

b.
The new demand schedule for Maine lobsters when French consumers can buy them is:

Price (per pound) Quantity demanded (pounds)
25 300
20 500
15 700
10 900
5 1,100
To find the new equilibrium price and quantity, we need to plot the new demand curve along with the existing supply curve.

New demand and supply curve:

Price (per pound) Quantity demanded (pounds) Quantity supplied (pounds)
25 300 800
20 500 700
15 700 600
10 900 500
5 1,100 400
The new equilibrium price and quantity can be found where the new demand and supply curves intersect. From the graph, we can see that the new equilibrium price is $20 per pound and the new equilibrium quantity is 500 pounds of lobster.

The price at which fishermen can sell lobster will increase from $15 to $20 per pound. The price paid by U.S. consumers will also increase from $15 to $20 per pound. The quantity consumed by U.S. consumers will decrease from 600 pounds to 500 pounds.