ECON201 Saudi Electronic University Supply and Demand Questions

Assignment Question(s):(Marks:30)
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?[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]