The domestic demand and supply curves for bananas in Conanda

The domestic demand and supply curves for bananas in Conanda are given by the following:

                        QD = 12 – 2*P P:    $/ton

                        QS =   P                                              Q:    tons of bananas

Conanda is a small economy that trades in the world banana market, where the world price of bananas is $2/ton. The Conandian government has a tariff of $1/ton on imported bananas.

Solution

Conanda imports 3 tons of bananas.

World price is $ 2 and tariff is $ 1 which means at price of $ 2 + $ 1 = $ 3

Qd = 12 - 2(3) = 6 units

Qs = 3 units

Imports = Qd - Qs = 6 - 3 = 3 units

At price of $ 3, imports of bananas is equal to 3 units.