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  • 3 years ago

In Problem Set 1, question 1d solutions do agree with me that the supply curve shifts to the right in the Chinese textile market. However, I do not agree that the equilibrium price will be higher. How can this be (considering the intersection point will always be lower in terms of y-value)?

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  1. anonymous
    • 3 years ago
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    In 1d - Mexican Workers go on Strike -> Cost of Production of textile in Mexico Increases -> therefore, It's supply decreases (Shifts to the left) & price Increases. -> Therefore, Mexican Textiles demand decreases. -> as China Textiles Products are MT's substitutes, CT's demand Increases. (Shifts to right) -> As a result, Equilibrium price of Chinese Textiles Increases.

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