Country X and Country Y are capable of producing both apples…
Country X and Country Y are capable of producing both apples and bananas. Assume a two-country, two-product model. Country Y has absolute advantage in the production of both apples and bananas, and comparative advantage in the production of bananas. The market for oranges in Country Z is illustrated on Figure 5. Figure 5 Due to increased awareness of the possible health benefits of vitamin C, the demand for oranges in Country Z increases by 60 000 per month at each price. (e.ii) Calculate the change in social (community) surplus before and after of the increase in demand for oranges.