CvLTAELG1AAv7GMjp8RSaPGsvS8 ECO402 GDB Solution Fall 2012 |
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ECO402 GDB Solution Fall 2012

The case:

New Zealand is the world’s largest wool producer and one of the biggest exporters of wool in the international market. In recent years, the wool industry has continued to contract due to unfavorable market conditions. Fluctuations of wool prices in the international market strongly influence the economy of New Zealand because wool is a main exporting product of New Zealand. It’s just a fact of life that China has become the strongest bidder of the wool, pay the most for the wool, make the cheapest garments, take the smallest margins and earn maximum revenue. According to a report, china and European Union had 47% and 31% market shares of this commodity respectively while Australia had only 1% market shares of this commodity. Keeping in mind the given situation, Government of New Zealand has taken two serious decisions for this industry. Firstly, government has subsidized the agricultural sector. Secondly, veterinary medicines for cattle are provided to the farmers at lower prices.


Being a student of economics, discuss how these decisions will affect demand and supply of wool in the market of New Zealand. Secondly, discuss either this policy will be in favor of china or not.

(Write “to the point” answer, avoid irrelevant or extra details.)

Important Instructions:

1. Your discussion must be based on logical facts.

2. Do not copy or exchange your answer with other students. Two identical / copied comments will be marked Zero (0) and may damage your grade in the course.

3. Obnoxious or ignoble answer should be strictly avoided.

4. Questions / queries related to the content of the GDB, which may be posted by the students on MDB or via e-mail, will not be replied till the due date of GDB is over.

For Detailed Instructions please see the GDB Announcement.

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