1. 钢铁出口

2. Case background
Consider a small country that exports steel
Suppose that a ‘pro-trade’ government decides to subsidize the export of steel by
paying a certain amount for each ton sold
abroad.

3. Questions How does this export subsidy affect
the domestic price of steel,
the quantity of steel produced,
the quantity of steel consumed,
the quantity of steel exported?
How does it affect consumer surplus,
producer surplus,
government revenue,
total surplus?
Is it a good policy from the standpoint of economic efficiency?

4. First we assume: Analysis
A country is isolated from rest of the world and produces steel.
The market for steel consists of the buyers and sellers in the country.
No one in the country is
allowed to import or export
steel.

5. Domestic price adjusts to balance demand and supply.
Quantity of steel
Price of steel
Consumer surplus
Equilibrium price
Equilibrium quantity
Producer surplus
Domestic price adjusts to balance demand and supply.
The sum of consumer and producer surplus measures
the total benefits that buyers and sellers receive.

6. we assume the country is an exporting country without subsidy:
Second
we assume the country is an exporting
country without subsidy:
the country is a small economy.
The country is a price taker. (Price taker means that the country takes the world price of steel as given. They can sell steel at this price and be exporters or buy steel at this price and be importers. )

7. A D B C We can analysis this question through the following graph:
Price of Steel
Exporting Country
Domestic supply A
Exports
Price after trade
World price B D
Price before trade C
Domestic demand
Quantity of Steel

8. Changes in Welfare from a Free Trade: The Case of an Exporting Country

9. It shows that the domestic equilibrium price is below the world price of steel.
Once free trade is allowed, the domestic price will rise to equal the world price.
The domestic quantity demanded is smaller than the domestic quantity supplied and the country becomes an exporter of steel.

10. The analysis of an exporting country
without subsidy yields two conclusions:
Domestic producers of the good are better off, and domestic consumers of the good are worse off.
Trade raises the economic well-being of the nation as a whole.

11. Now
we analysis the exporting country with subsidy
An export subsidy increases the price of steel exports received by producers but not affect the world price. Let us solve this question though a figure.

12. Price of steel
Supply A
PW + s B C D PW E G F
Demand
Q1D
Q1S
Q2S
Quantity of steel

13. As the following table shows, consumer surplus is unaffected,
Without Subsidy
With Subsidy
CHANGE
Consumer Surplus
A+B
Producer Surplus
E+F+G
B+C+E+F+G
+(B+C)
Government Revenue
–(B+C+D)
Total Surplus
A+B+E+F+G
A+B–D+E+F+G –D
As the following table shows, consumer surplus is unaffected,
producer surplus rises, government revenue declines, and
total surplus declines.

14. Thank You !