Microeconomics - Assignment

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Added on 2020-05-28

Microeconomics - Assignment

Added on 2020-05-28

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Running Head: MICROECONOMICSMicroeconomicsName of the StudentName of the UniversityAuthor note

MICROECONOMICS1Table of ContentsAnswer a..........................................................................................................................................2Answer b..........................................................................................................................................3Answer c..........................................................................................................................................3Answer d..........................................................................................................................................4References........................................................................................................................................5

MICROECONOMICS2Answer aGovernment provides export subsidy to promote export in the country. The followingfigure explain the effect of a subsidy on beef exported from Australia to Canada. Figure 1: Effect of export subsidy in Australia(Source: as created by Author)In the above DD and SS are the domestic demand and domestic supply curve of beef. Theworld price is set at PW. At this price, domestic demand of beef equals D0 and domestic supply isS0. At the world price the Australia exported (D0 – S0) amount of beef. Suppose that, governmentprovides a subsidy of s. The subsidy raises price received by the domestic exporter to PWS. Thedomestic consumers now faced a high price. The high price received by the domestic beefproducers now encourage them to produce more(Gopinath, G., Helpman, E. and Rogoff, K. eds.,2014). At the price PWS, the domestic supply now increases to S1 while domestic demand reducesto D1. The increased supply and reduced demand in the domestic market increase the volume ofexport. The quantity of beef exported now become (S1 – D1)

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