If the world price is greater than $120, does this create a shortage or surplus of contact lenses in the domestic market? PS- Graph shown is for contact lenses Idk what would the right answer is?
If the world price is greater than $120, does this create a shortage or surplus of contact lenses in the domestic market? PS- Graph shown is for contact lenses Idk what would the right answer is?
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter9: Application: International Trade
Section: Chapter Questions
Problem 2PA
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Question
If the world price is greater than $120, does this create a shortage or surplus of contact lenses in the domestic market?
PS- Graph shown is for contact lenses
Idk what would the right answer is?
Transcribed Image Text:Vivan
Domestic Market: No Trade
No International Trade
Okay, so if the world price - the price you can get
for a box of your contact lenses -- is greater than
the domestic equilibrium price of $120, will you
increase or decrease your quantity supplied of
contact lenses?
240
Julio
200
160
Like other domestic contact lens
manufacturers, we will increase our quantity
supplied.
120-
80
Vivan
40
That is correct!
40
80
120
160
200
240
• Quantity Supplied - Quantity Demanded
Наpру
Domestic Market
Economic
Price
Quantity Supplied
Quantity Demanded
s Mentor
240
If the world price is greater than $120, does this
create a shortage or surplus of contact lenses in
the domestic market?
20
20
220
40
40
200
60
60
180
Julio
80
80
160
100
100
140
120
120
120
140
140
100
It creates a surplus – the domestic quantity supplied will be greater than the
domestic quantity demanded.
160
160
80
180
180
60
It creates a shortage -- the domestic quantity demanded will be greater than the
domestic quantity supplied.
200
200
40
220
220
20
240
240
Expert Solution
Step 1
Surplus occurs when the supply of goods is more than the demand for goods. On the contrary, shortage occurs when the supply of goods is less than the demand for goods.
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