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[spengler]

just a question in my mind I like to solve lol.

So lets say if USA possesses excellent climate for growing peanuts, but most of the population don't like peanuts. And now lets say CHINA climate is unsuitable for growing peanuts, but people enjoy eating peanut.

So my question is, the price of peanut would be higher in CHINA right?
And USA would export peanuts to CHINA?
ANd would this international trade in peanuts would widen? narrow? not change? the price differential between the two countries.

and my last question. When these countries began to trade with each other, would the consumers in USA will be better off, and producers in Denmark be better off?

[stein74]

The price of the peanut is reliant on how much demand there is for peanuts and how much can be supplied to reach the demand, plus any taxes added from the country. So if 100,000 peanuts are demanded and 120,000 can be supplied then the price could be lower. However if 200,000 are demanded and only 100,000 can be supplied then price goes up.

[muireach]

Pre-trade price in China will be higher as there is a demand but the supply by domestic producers is very less. And pre-trade price in USA will be lower as there is more supply than demand.

When USA exports to China, the supply in China increases and hence lower the price. Similarly in USA, since the production will be exported so the supply will decrease in domestic market leading to an increase in their price.

Thus international trade will narrow the price differential in the country.

In China the producer surplus will decrease (consumer welfare would increase).