Question

Concepts: Comparative Advantage and Supply & Demand

The US uses and needs pork in order to produce ribs for Americans and Denmark is the supplier. If the US puts a ban on imports for pork from Denmark, how will this affect both trading partners and the economy? Will there be a shortage for the American market due to less pork, will there be a surplus in the Denmark market due to the ban on imports. Explain and draw graphs include shifts in curve/shortages/surplus/equilibrium.

Answer 1

If the US puts a ban on imports for pork from Denmark, then the supply curve in US market of pork will contract. The supply curve will shift leftward and less will be supplied at each price level. At the previous equilibrium price there will be a shortage as quantity demanded exceeds quantity supplied. At the new intersection of demand and supply curves, the equilibrium price will be higher and quantity of porks will be lower.

In Denmark, the demand for pork will contract. The demand curve will shift leftward and less will be demanded at each price level. At the previous equilibrium price there will be a surplus as quantity demanded falls short of quantity supplied. At the new intersection of demand and supply curves, the equilibrium price will be lower and quantity of porks will be lower.