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As part of re-launching its commercial policy, the UK government considers what trade policy tools to apply for mushrooms. The government already commissioned an analysis on the demand and supply conditions on the mushroom market (see below). The Treasury asks you to write a report including the following elements:
Analysis of the mushroom market in Britain
Even though Britain’s climate is quite conducive for mushroom production and collection, domestic demand exceeds domestic supply. Therefore, the country imports huge amounts of mushroom from Denmark (40%), Chile(40%) and Russia (20%). Britain already has a free trade agreement with Denmark but not with the other two countries.
UK mushroom producers can be divided into two large groups: small producers and those that produce on large farms. Large farms can be operated more efficiently thanks for economies of scale. Consumers can also be divided into two main groups: small retailers, who mostly buy from local producers and larger retailers, who also import mushrooms.
Domestic demand and supply were estimated with sophisticated statistical techniques and machine learning. According to these estimated, domestic demand in the UK market is:
Domestic supply is:
The world price is pw=400.
When writing the report, make sure that you specify your assumptions and use clear economic arguments to support your statements. Refer to theories and categories we learned but apply them specifically to the problems. Please use clear and concise language. You can choose the structure of your report, for example you can write one unified report or answer each question separately. Answers building on a good coverage of different approaches, theories and examples will attract high marks. You are free to include graphs or figures, but make sure to reference them if they are from and external source.
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