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The following are the equations of demand and supply of rice in Home Country and Foreign...

The following are the equations of demand and supply of rice in Home Country and Foreign Country. P in the equations is the price of rice in the same currency.

Home Country’s demand for rice is QDH = 2,400 – 30P

Home Country’s supply for rice is QSH = 50P

Foreign Country’s demand for rice is QDF = 4,800 – 40P

Foreign Country’s supply for rice is QSF = 80P

  1. Calculate i) the equilibrium price of rice in Home Country and ii) the equilibrium quantity of rice in Home Country.

  2. Calculate i) the equilibrium price of rice in Foreign Country and ii) the equilibrium quantity of rice in Foreign Country.

    Further to parts A and B, suppose transportation cost between the 2 countries is zero. Home Country and Foreign Country now reach a free-trade agreement.

  3. Which country will have an import demand and which country will have a supply of export on rice? Explain.

  4. Calculate the world price and volume of trade of rice if Home Country and Foreign Country can trade freely.
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