Saudi Electronic University Supply and Demand in Market Questions

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Business Finance

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?[15 Marks]

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.[15 Marks]