Question

Suppose that research finds a link between high fructose corn syrup (HFCS) and obesity, which then leads American consumers to switch from HFCS products to pure cane sugar products. The graphs show the markets for cane sugar in Haiti and the United States before the studies were divulged. Shift the curves in the graphs, including the horizontal world price curve, to describe the new trade equilibrium that results after the switch in preferences of American households, and then answer the follow‑up question.
Assume that the United States and Haiti are the only non‑HFCS sugar trading parties in the world and that there are no quotas, subsidies, or tariffs distorting these markets.

Answer 1

The new equilibrium from the information shows that sugar cane producers in Haiti benefited.

What is equilibrium?

It should be noted that equilibrium simply means balance that is when the supply of goods and demand are equal.

In this case, in the situation of free trade, the world price line is a horizontal lines. The fact that the consumers in the United States demanded more sugar cane product means that the sugar cane producers in Haiti benefited.

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