Copyright © 2006 Thomson Learning 9 9 Application: International Trade
Copyright © 2006 Thomson Learning 9 Application: International Trade.
Mar 28, 2015
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Copyright © 2006 Thomson Learning
99Application: International Trade
Figure 1The Equilibrium without International Trade
Copyright © 2004 South-Western
Consumersurplus
Producersurplus
Priceof Steel
0 Quantityof Steel
Domesticsupply
Domesticdemand
Equilibriumprice
Equilibriumquantity
Figure 2 International Trade in an Exporting Country
Copyright © 2004 South-Western
Priceof Steel
0Quantityof Steel
Domesticsupply
Priceaftertrade World
price
DomesticdemandExports
Pricebeforetrade
Domesticquantity
demanded
Domesticquantitysupplied
Figure 3 How Free Trade Affects Welfare in an Exporting Country
Copyright © 2004 South-Western
D
C
B
A
Priceof Steel
0 Quantityof Steel
DomesticsupplyPrice
aftertrade World
price
Domesticdemand
Exports
Pricebefore
trade
Figure 3 How Free Trade Affects Welfare in an Exporting Country
Copyright © 2004 South-Western
D
C
B
A
Priceof Steel
0 Quantityof Steel
DomesticsupplyPrice
aftertrade World
price
Domesticdemand
Exports
Pricebefore
trade
Producer surplusbefore trade
Consumer surplusbefore trade
Copyright © 2006 Thomson Learning
How Free Trade Affects Welfare in an Exporting Country
Figure 4 International Trade in an Importing Country
Copyright © 2004 South-Western
Priceof Steel
0 Quantity
Priceafter
trade
Worldprice
of Steel
Domesticsupply
Domesticdemand
Imports
Domesticquantitysupplied
Domesticquantity
demanded
Pricebeforetrade
Figure 5 How Free Trade Affects Welfare in an Importing Country
Copyright © 2004 South-Western
C
B D
A
Priceof Steel
0 Quantityof Steel
Domesticsupply
Domesticdemand
Priceafter trade
Worldprice
Imports
Pricebefore trade
Figure 5 How Free Trade Affects Welfare in an Importing Country
Copyright © 2004 South-Western
C
B
A
Priceof Steel
0 Quantityof Steel
Domesticsupply
Domesticdemand
Priceafter trade
Worldprice
Pricebefore trade
Consumer surplusbefore trade
Producer surplusbefore trade
Figure 5 How Free Trade Affects Welfare in an Importing Country
Copyright © 2004 South-Western
C
B D
A
Priceof Steel
0 Quantityof Steel
Domesticsupply
Domesticdemand
Priceafter trade
Worldprice
Imports
Pricebefore trade
Producer surplusafter trade
Consumer surplusafter trade
Copyright © 2006 Thomson Learning
How Free Trade Affects Welfare in an Importing Country
Figure 6 The Effects of a Tariff
Copyright © 2004 South-Western
Priceof Steel
0 Quantityof Steel
Domesticsupply
Domesticdemand
Pricewith tariff Tariff
Importswithout tariff
Equilibriumwithout trade
Pricewithout tariff
WorldpriceImports
with tariff
QSQS QD QD
Figure 6 The Effects of a Tariff
Copyright © 2004 South-Western
Priceof Steel
0 Quantityof Steel
Domesticsupply
Domesticdemand
Importswithout tariff
Equilibriumwithout trade
Pricewithout tariff
Worldprice
QS QD
Producer surplusbefore tariff
Consumer surplusbefore tariff
Figure 6 The Effects of a Tariff
Copyright © 2004 South-Western
A
B
Priceof Steel
0 Quantityof Steel
Domesticsupply
Domesticdemand
Pricewith tariff Tariff
Importswithout tariff
Equilibriumwithout trade
Pricewithout tariff
WorldpriceImports
with tariff
QSQS QD QD
Consumer surpluswith tariff
Figure 6 The Effects of a Tariff
Copyright © 2004 South-Western
C
G
Priceof Steel
0 Quantityof Steel
Domesticsupply
Domesticdemand
Pricewith tariff Tariff
Importswithout tariff
Equilibriumwithout trade
Pricewithout tariff
Worldprice
QS
Importswith tariff
QS QD QD
Producer surplusafter tariff
Figure 6 The Effects of a Tariff
Copyright © 2004 South-Western
E
Priceof Steel
0 Quantityof Steel
Domesticsupply
Domesticdemand
Pricewith tariff Tariff
Importswithout tariff
Pricewithout tariff
Worldprice
QS
Importswith tariff
QS QD QD
Tariff Revenue
Figure 6 The Effects of a Tariff
Copyright © 2004 South-Western
C
G
A
ED F
B
Priceof Steel
0 Quantityof Steel
Domesticsupply
Domesticdemand
Pricewith tariff Tariff
Importswithout tariff
Pricewithout tariff
WorldpriceImports
with tariff
QSQS QD QD
Deadweight Loss
Copyright © 2006 Thomson Learning
The Effects of a Tariff
Figure 7 The Effects of an Import Quota
Copyright © 2004 South-Western
Priceof Steel
0 Quantityof Steel
Domesticsupply
Domesticsupply
+Import supply
Domesticdemand
Isolandianprice with
quota
Importswithout quota
Equilibriumwith quota
Equilibriumwithout trade
Quota
Importswith quota
QD
Worldprice
Worldprice
Pricewithout
quota=
QS QDQS
Figure 7 The Effects of an Import Quota
Copyright © 2004 South-Western
A
E'C
B
G
D E" F
Priceof Steel
0 Quantityof Steel
Domesticsupply
Domesticsupply
+Import supply
Domesticdemand
Isolandianprice with
quota
Importswithout quota
Equilibriumwith quota
Equilibriumwithout trade
Quota
Importswith quota
QD
Worldprice
Worldprice
Pricewithout
quota=
QS QDQS
Copyright © 2006 Thomson Learning
The Effects of an Import Quota
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