Question

2 Import Demand (25 points)a) (10 points) Draw a domestic market for sugar with a supply ofP=.2 +.1QS(note: price is per poundand quantity is measured in thousands of tons) and a demand ofP= 5−.2QD.b) (5 points) If the world price of sugar is $1.20, how much money do consumers spend on importedsugar?

Answer 1

(Attached graph as there is no tool to draw graph in the plataform)

Consumer will spend 10.8 dollar in imported sugar

Step-by-step explanation:

As stated in the rgaph Supply and demand in the domistic market meet at 18 units with a price of 2.2

As imported sugar price is better consumer will prefer to import sugar at $1.2

Then:

The loca l supply at that price will be

1.2 = 0.20 + 0.1 Q

(1.2 - 0.20) / 0.1 = Q

Q = 10

Demand:

1.2 = 5 - 0.2 x Q

Q= (5 - 1.2) / 0.2 = 19

Then, local market will suply for 10 units

the rest will be imported

9 x 1.2 = 10.8