2 2. Unstable export marketsSometimes the exports of developing nations are concentrated in only one or a few primary products. For example, according to World Bank data,tobacco constitutes 50% of Malawi's total exports. Therefore, changes in demand or supply of tobacco can have significant effects on the health ofMalawi's economy.The current world price of tobacco is $5.00 per pound, but there is uncertainty about the shape of the demand and supply curves. The followinggraphs (scenario A and scenario B) show two possibilities for demand and supply in the market for tobacco.Suppose that an adoption of healthier lifestyles in advanced countries leads to a fall in the global demand for tobacco.On the following graph, shift the demand or supply curve of scenario A to show what happens in the market for tobacco as a result of this event.Note: Select and drag one or both the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps backto its original position, just drag it a little farther.PRICE (Dollars)10987610321001Scenario ASupplyDemand2 3 4 5 6 7 8QUANTITY (Pounds of tobacco)10DemandSupply? On the following graph, shift the demand or supply curve of scenario B in the same direction that you did in scenario A.PRICE (Dollars)10987co1032₂210IScenario B0 1 2 3 4 5 6 7QUANTITY (Pounds of tobacco)DemandTrueFalse8Supply9 10Original PriceNew PriceScenario (Dollars per pound) (Dollars per pound)AB5.005.00In the following table, enter the new price for tobacco under each scenario as a result of the adoption of healthier lifestyles. (Hint: Select the blackpoint (plus symbol) representing the new equilibrium on the previous graphs to see its coordinates.)DemandSupplyTrue or False: Because the supply of tobacco is more elastic in scenario A versus scenario B, changes in demand cause more volatile price fluctuationsfor Malawi under scenario A.

Market equilibrium is what is happening of the market where the demand for goods and services rises…

2. Unstable export markets Sometimes the exports of developing nations are concentrated in only one or a few primary products. For example, according to World Bank data, tobacco constitutes 50% of Malawi's total exports. Therefore, changes in demand or supply of tobacco can have significant effects on the health of Malawi's economy. The current world price of tobacco is $5.00 per pound, but there is uncertainty about the shape of the demand and supply curves. The following graphs (scenario A and scenario B) show two possibilities for demand and supply in the market for tobacco. Suppose that an adoption of healthier lifestyles in advanced countries leads to a fall in the global demand for tobacco.

2. Unstable export markets Sometimes the exports of developing nations are concentrated in only one or a few primary products. For example, according to World Bank data, tobacco constitutes 50% of Malawi's total exports. Therefore, changes in demand or supply of tobacco can have significant effects on the health of Malawi's economy. The current world price of tobacco is $5.00 per pound, but there is uncertainty about the shape of the demand and supply curves. The following graphs (scenario A and scenario B) show two possibilities for demand and supply in the market for tobacco. Suppose that an adoption of healthier lifestyles in advanced countries leads to a fall in the global demand for tobacco.

Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781305971509

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter9: Application: International Trade

Section: Chapter Questions

Problem 1CQQ

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Similar questions

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