Question: Consider the demand curve for pomegranates in two countries. In one country, pomegranates are a critical part of the diet and are central to the
Consider the demand curve for pomegranates in two countries. In one country, pomegranates are a critical part of the diet and are central to the preparation of many popular food recipes. For most of these dishes, there is no feasible substitute for pomegranates. In the second country, households will purchase pomegranates if the price is right, but they are not considered by consumers to be particularly special or unique, and few popular dishes rely on pomegranates in their recipes.
Suppose pomegranates are native to both countries. Suppose, further, that due to inherent limitations of shipping options, there is no inter-country trade in pomegranates. Each country's market for pomegranates is independent of the other countries. Finally, suppose that in both countries, droughts and other weather-related shocks periodically cause unexpected changes in supply conditions.
The graph below shows the time paths of pomegranate prices over a 10-year period in each country (the blue (solid) line is the time path in one country; the red (dashed) line is the time path in the other country.) Based on the information provided, which is the time path for each country?
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Price of Pomegranates Time
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