00:01
This question we are given a trade scenario.
00:03
Let's take into account that in early 2014, china decided to cancel the 1 .2 million tons of rice import contract with the thailand.
00:22
So in this case, we are going to analyze the scenario in several different cases.
00:41
Case one is compare the effect of the cancellation of the import contract on an equilibrium price and the quantity of rice in case of thailand and as well as in china.
00:54
Let's take into account and look into it using a graph.
01:02
In order to determine the market scenario of this decision, let's consider the supply and the demand dynamics of the rice market in thailand and china.
01:18
We'll examine the impact of the cancellation of the import contracts on an equilibrium price and the quantity of rice in thailand and china.
01:28
Let's start with thailand first.
02:03
In thailand, with the cancellation of the import contract, the demand of the rice from china decreases.
02:12
Next, as a result, the demand curve of the thai rice shifted to the left.
02:20
This decrease in the demand curve causes a decrease in the equilibrium points from p1 and q1 to p2 and q2, which will be the new equilibrium point.
02:56
Now let's discuss in a form of diagram.
03:00
Let's take y axis and x axis and the initial point 0.
03:11
This is demand and this is the quantity supply.
03:15
The demand curve as d1 and the supply curve as s1.
03:27
Let's suppose in the initial form, the price is worth p1 and q1 is the quantity demanded.
03:37
After the shift in the, after the cancellation of the import from the china, the demand will subsequently shift backwards to d2, whereas there will be no change in the supply.
04:00
So by this action, a new price and the quantity will form such as p2 and q2, which are lower than the original price and the quantities.
04:19
Let's suppose the original equilibrium is as q1 and the after changes, the equilibrium is formed at point that's denoted as e2.
04:37
So in case of thailand, with the cancellation of import from china, the demand curve shifts backward to the left, whereas the supply remains constant, leading to a decrease in the level of the price and the quantity.
04:53
Now let's look into the case of china.
05:01
In china, the cancellation of import contracts means that china no longer receives rice from the thailand.
05:14
This means that the supply of rice in china remains the same as it is not directly impacted by the cancellation.
05:36
Next, as a result of this, the supply curve remains unchanged.
05:41
So without the import of thai rice, the demand for rice in china stays the same, resulting in no demand curve...