Supply and Demand Questions Response

Q. 1. Suppose both supply and demand in a market are relatively inelastic. Will a tax placed on the product in market generate a relatively large or small deadweight loss? Why?

Q. 2. If the world price of a good exceeds the domestic price of the good, will the country export or import the good. In this scenario who gain from free trade: Domestic consumers or Domestic producers? Explain.

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• Students are advised to make their work clear and well presented, marks may be reduced for poor presentation. This includes filling your information on the cover page.

• Students must mention question number clearly in their answer.
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