Copyright © 2006 Thomson Learning 9 Application: International Trade

Figure 1The Equilibrium without International Trade Copyright © 2004 South-Western Consumer surplus Producer surplus Price of Steel 0 Quantity of Steel Domestic supply Domestic demand Equilibrium price Equilibrium quantity

Figure 2 International Trade in an Exporting Country Copyright © 2004 South-Western Price of Steel 0 Quantity of Steel Domestic supply Price after trade World price Domestic demand Exports Price before trade Domestic quantity demanded Domestic quantity supplied

Figure 3 How Free Trade Affects Welfare in an Exporting Country Copyright © 2004 South-Western D C B A Price of Steel 0Quantity of Steel Domestic supply Price after trade World price Domestic demand Exports Price before trade

Figure 3 How Free Trade Affects Welfare in an Exporting Country Copyright © 2004 South-Western D C B A Price of Steel 0Quantity of Steel Domestic supply Price after trade World price Domestic demand Exports Price before trade Producer surplus before trade Consumer surplus before 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 Price of Steel 0 Quantity Price after trade World price of Steel Domestic supply Domestic demand Imports Domestic quantity supplied Domestic quantity demanded Price before trade

Figure 5 How Free Trade Affects Welfare in an Importing Country Copyright © 2004 South-Western C B D A Price of Steel 0 Quantity of Steel Domestic supply Domestic demand Price after trade World price Imports Price before trade

Figure 5 How Free Trade Affects Welfare in an Importing Country Copyright © 2004 South-Western C B A Price of Steel 0 Quantity of Steel Domestic supply Domestic demand Price after trade World price Price before trade Consumer surplus before trade Producer surplus before trade

Figure 5 How Free Trade Affects Welfare in an Importing Country Copyright © 2004 South-Western C B D A Price of Steel 0 Quantity of Steel Domestic supply Domestic demand Price after trade World price Imports Price before trade Producer surplus after trade Consumer surplus after 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 Price of Steel 0 Quantity of Steel Domestic supply Domestic demand Price with tariff Tariff Imports without tariff Equilibrium without trade Price without tariff World price Imports with tariff Q S Q S Q D Q D

Figure 6 The Effects of a Tariff Copyright © 2004 South-Western Price of Steel 0 Quantity of Steel Domestic supply Domestic demand Imports without tariff Equilibrium without trade Price without tariff World price Q S Q D Producer surplus before tariff Consumer surplus before tariff

Figure 6 The Effects of a Tariff Copyright © 2004 South-Western A B Price of Steel 0 Quantity of Steel Domestic supply Domestic demand Price with tariff Tariff Imports without tariff Equilibrium without trade Price without tariff World price Imports with tariff Q S Q S Q D Q D Consumer surplus with tariff

Figure 6 The Effects of a Tariff Copyright © 2004 South-Western C G Price of Steel 0 Quantity of Steel Domestic supply Domestic demand Price with tariff Tariff Imports without tariff Equilibrium without trade Price without tariff World price Q S Imports with tariff Q S Q D Q D Producer surplus after tariff

Figure 6 The Effects of a Tariff Copyright © 2004 South-Western E Price of Steel 0 Quantity of Steel Domestic supply Domestic demand Price with tariff Tariff Imports without tariff Price without tariff World price Q S Imports with tariff Q S Q D Q D Tariff Revenue

Figure 6 The Effects of a Tariff Copyright © 2004 South-Western C G A EDF B Price of Steel 0 Quantity of Steel Domestic supply Domestic demand Price with tariff Tariff Imports without tariff Price without tariff World price Imports with tariff Q S Q S Q D Q D Deadweight Loss

Copyright © 2006 Thomson Learning The Effects of a Tariff

Figure 7 The Effects of an Import Quota Copyright © 2004 South-Western Price of Steel 0 Quantity of Steel Domestic supply Domestic supply + Import supply Domestic demand Isolandian price with quota Imports without quota Equilibrium with quota Equilibrium without trade Quota Imports with quota Q D World price World price Price without quota = Q S Q D Q S

Figure 7 The Effects of an Import Quota Copyright © 2004 South-Western A E' C B G D E" F Price of Steel 0 Quantity of Steel Domestic supply Domestic supply + Import supply Domestic demand Isolandian price with quota Imports without quota Equilibrium with quota Equilibrium without trade Quota Imports with quota Q D World price World price Price without quota = Q S Q D Q S

Copyright © 2006 Thomson Learning The Effects of an Import Quota