Question

Economics Chapter 4

1.) Suppose that the United States stops importing shrimp from China because of a trade war. What would happen to the demand and supply curve of shrimp in the United States and therefore the equilibrium price and quantity in the market for shrimp? Draw one graph showing all the changes, and label the graph appropriately. Give an explanation for the changes that you show on the graph.

Please help, I'm a bit lost!

Answer 1

A decrease in the imports will decrease the supply in the market and that will shift the supply curve to the left, that will increase the price and decrease the quantity in the market. the old equilibrium will be at A and the new equilibrium will be at a higher price that is P* and the new quantity will be lower Q1.