[Jessalynn]

The US grows sugar cane but not enough to meet the demand. Cuba grows low cost sugar cane but there is an embargo that prevents the US from buying Cuban products.

a. If the embargo is lifted and Cuba sells sugar to the US how would the price of sugar change in the US?
b. How would the price of sugar change in Cuba?

[kp42484]

a) Since the embargo has lifted, supply of sugar in the US will increase. Referring to the typical supply-demand curves, the supply curve shifts outward, and the price of sugar in the US falls. The quantity increases.

b) Since the embargo has lifted, demand for Cuba's sugar will increase. This will shift the demand curve for cuban sugar out. The price of sugar in Cuba will go up.

With these problems, try to think of who is demanding and who is supplying, and then draw supply and demand graphs. Shift your curves according to the situations in your problems. To answer your questions, I had to sketch quick little graphs! Be forwarned, however: this is all theoretical and many other factors may make what I told you untrue. When using supply-demand analysis, economists like to use "ceteris paribus (sp?)" or "all other things remaining equal" for a very good reason. No theory exactly predicts what happens in real life.

Hope this helps.