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The biggest economic news in recent history is the formation of the biggest free trade area in the world (the African Continental Free Trade Area, AfCFTA). The UN asserts that the economic bloc currently have a combined business and consumer spending of $4 trillion.
a. Discuss how AfCFTA could be trade creating free trade area. What are the welfare gains? Support your answer with the relevant diagram (9 Marks)
b. What if AfCFTA is a trade diversion free trade area? Will this worsen welfare for the bloc? Provide diagrammatic support for your response (11 Marks)
Please note that all information is provided and the answer should be explained using diagrams hints why they are not provided. You have to make your own diagram.
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