trdwelf

trdwelf - Trade and Welfare In this section we examine the...

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Trade and welfare slide 1 Trade and Welfare Trade and Welfare In this section, we examine the effects on welfare of international trade. The approach taken here is to use the devices of Producer and Consumer Surplus. The change in social welfare when trade is allowed can be measured by the changes in producer and consumer surplus.
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Trade and welfare slide 2 S D Q P Q* P* = $10 The diagram below shows the U.S. domestic market for wine. No trade is taking place. WINE MARKET
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Trade and welfare slide 3 In the case of wine, let's suppose the world price is lower than the U.S no-trade price, say, $8.00 per bottle.
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Trade and welfare slide 4 S D Q P Q* P* = $10 What happens with trade? What are the welfare effects of trade? WINE MARKET P* = $8 Q" Q'
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Trade and welfare slide 5 S D Q P P* = $10 U.S. consumers gain b + d. U.S. producers lose b. Welfare rises by d. WINE MARKET P* = $8 Q" Q' d c b a
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gains from trade when the world price is below the domestic, no trade price. Hidden slide
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trdwelf - Trade and Welfare In this section we examine the...

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