ECON 2306 10 Government and Trade

Importingcountry withouttradeourimportingcountryhasa

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: A PS=B+C+D TS=A+B+C+D Net Welfare increase with Trade=C D Note: while some will lose with trade, 400 Qws=800 Qthe loser’s losses are less than the 6 winner’s gains. Importing Country Without trade our importing country has a market for airplanes as described in the graph. P (in millions) Recall, Q* is not only where the importing country is producing but also where they are consuming. S P*=120 D Q*=200 Q 7 Importing Country Recall the world market price is 100 million (where Qws=Qwd) Notice no domestic supplier can make air planes at this price so it is beneficial to the exporting S country (it maximizes their total surplus) to import all of the airplanes they will consume. Suppose they import 500 planes. P (in millions) Pd=120 Pw=100 D 200 500 Q 8 Importing Country Gains from trade for importing country importing airplanes Domestic Welfare for Importing Country Before Trade Welfare Domestically: CS=A PS=B S TS=...
View Full Document

This note was uploaded on 03/23/2014 for the course ECON 2306 taught by Professor Bailiff during the Spring '08 term at UT Arlington.

Ask a homework question - tutors are online