Question

Wakanda has a growing solar panel industry that is politically important and that has been completely protected from trade. They are considering opening up this market to international competition. As part of this decision you are asked to analyze the effects of the solar panel trade on Wakanda’s welfare.

Assume initially that Wakanda is under autarky and does not trade with other countries. The domestic supply and demand equations for solar panels are as follows:

QD =700?P

QS =.5P?50

Assume further that Wakandais a “small” trading country and that it opens up to trade. The world price of solar panels is $550. Calculate how many solar panels Wakanda will produce and consume under trade. How many solar panels will it import/export? Please graph the excess supply/demand curve.

Answer 1