•11TRADE ANALYSIS WITH DEMAND AND SUPPLYDEMAND AND SUPPLY3Overview Questions About Overview Questions About International TradeInternational Trade1.Why do countries trade? What is the basis for trade, especially the product (commodity) composition?2.What are the overall gains (or losses) from trade for each country?3.What are the effects of trade on each country’s economic structure? Production, Consumption?4.What are the effects of trade on the distribution of income within each country? Winners, Losers?10SurplusesSurpluses•Producer surplus:The amount a producer gains from a “market” sale: The difference between the amount he actually receives andThe minimumamount he would have been willing to receiveA consequence of arms-length market transactions and competitionWe are pretty familiar with this. We call it “Economic Profit”
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