Chapter 9: International Trade

Ex: Coffee Price domestic = 3 dollars -> export -> P domestic increase until = P
world
Price world = 5 dollars
Beef : P domestic = 10 dollars -> import -> P domestic decrease ulti = P
world
P world = 8 dollars
1) Exporting country:
No trade/export :
CS = A + B
PS = D
TS = A B D
With Export:
CS= A
PS = B + C + D Efficiency
increase
TS = A + B + C+ D
2) Importing : Similar to export but when price is lower.

3) Tariff
P domestic = P world + Tariff
(P=8) Import and no Trade:
CS = ABCDEF
PS = G
TS = A B C D E F E G
With Tariff (P=9) Deadweight loss = D + F
CS = A B
PS = C + G
GS = E (tax revenue)
TS = A B C G E
Tariff Revenue = Tariff x Quantity