Question

What effect do you think the strike will have on Mexican grape producers? Mexican grape pickers? Mexican grape consumers? U.S. grape pickers?

Short answer

The surplus will decrease for Mexican grape producers.

The wage rate of Mexican grape pickers will fall.

The surplus of Mexican consumers will increase.

The wage rate of U.S. grape pickers will increase.

Step-by-step solution

Impact of trade stand-off on Mexican grape producers and grape pickers.

The stand-off will halt the export market of grapes in Mexico for the United States. In that case, the grape price will fall further due to surplus not being sold in the export market.A decrease in the price of grapes will decrease the return on it to the producers. In that case, the producer surplus will reduce and consumer surplus will increase.

A decline in the price will reduce the demand for grape pickers. The demand curve of grape pickers will shift leftward. A leftward shift will cause a new equilibrium position of the wage rate for grape pickers in the market at a lower level. A lower equilibrium position will cause a lesser decrease in the wage rate.

Impact of trade stand-off on the US grape producers and grape pickers.

The stand-off will halt the import of grapes in the United States. In that case, the grape price will reach the domestic price. Since the Mexican domestic price of grapes is lower than the trade price, the price of grapes in the US domestic market will increase.

An increase in the price of grapes will increase the return of US producers. In that case, the producer surplus will increase.

An increase in the price will increase the demand for grape pickers. The demand curve of grape pickers will shift forward, causing a new higher equilibrium position of the wage rate for grape pickers in the market.