Post on 20-Jun-2015
MicroeconomicsLecture 9
International Trade
Domestic Price
Domestic Price
the price of a good in the local market
World Price
World Price
the price of a good in the
world market
World Trade
World Trade
always winners and losers
World Trade
World Trade
more winners than losers
World Trade
World Trade
losers can be better
organized
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
Export Analysis
DomesticPrice
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
Export Analysis
DomesticPrice
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
Export Analysis
DomesticPrice
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
Export Analysis
DomesticPrice
WorldPrice
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
Export Analysis
DomesticPrice
WorldPrice
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
Export Analysis
DomesticPrice
WorldPrice
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
Export Analysis
DomesticPrice
WorldPrice
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
Export Analysis
DomesticPrice
WorldPrice
New DemandDomestic & World
“kink”
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
Export Analysis
DomesticPrice
WorldPrice
New DemandDomestic & World
“kink”
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
Export Analysis
DomesticPrice
WorldPrice
New DemandDomestic & World
“kink”
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
Export Analysis
DomesticPrice
WorldPrice
New DemandDomestic & World
“kink”
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
Export Analysis
DomesticPrice
WorldPrice
New DemandDomestic & World
“kink”
Total Sales
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
Export Analysis
DomesticPrice
WorldPrice
New DemandDomestic & World
“kink”
Total Sales
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
Export Analysis
DomesticPrice
WorldPrice
New DemandDomestic & World
“kink”
Total Sales
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
Export Analysis
DomesticPrice
WorldPrice
New DemandDomestic & World
“kink”
Domestic Sales Total Sales
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
Export Analysis
DomesticPrice
WorldPrice
New DemandDomestic & World
“kink”
Domestic Sales Total Sales
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
Export Analysis
DomesticPrice
WorldPrice
New DemandDomestic & World
“kink”
Domestic Sales Total Sales
Exports7 - 3 = 4
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
A
Export Analysis
DomesticPrice
WorldPrice
New DemandDomestic & World
“kink”
Domestic Sales Total Sales
Exports7 - 3 = 4
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
A
B
Export Analysis
DomesticPrice
WorldPrice
New DemandDomestic & World
“kink”
Domestic Sales Total Sales
Exports7 - 3 = 4
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
A
B
C
Export Analysis
DomesticPrice
WorldPrice
New DemandDomestic & World
“kink”
Domestic Sales Total Sales
Exports7 - 3 = 4
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
A
B
C
D
Export Analysis
DomesticPrice
WorldPrice
New DemandDomestic & World
“kink”
Domestic Sales Total Sales
Exports7 - 3 = 4
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
A
B
C
D
Export Analysis
DomesticPrice
WorldPrice
New DemandDomestic & World
“kink”
Domestic Sales Total Sales
Exports7 - 3 = 4
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
A
B
C
D
Domestic Buyerspay a higher pricelose B to Sellers
Export Analysis
DomesticPrice
WorldPrice
New DemandDomestic & World
“kink”
Domestic Sales Total Sales
Exports7 - 3 = 4
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
A
B
C
D
Domestic Buyerspay a higher pricelose B to Sellers
Domestic Sellersgain D from
world marketand gain B from domestic buyers
Export Analysis
DomesticPrice
WorldPrice
New DemandDomestic & World
“kink”
Domestic Sales Total Sales
Exports7 - 3 = 4
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
A
B
C
D
Domestic Buyerspay a higher pricelose B to Sellers
Domestic Sellersgain D from
world marketand gain B from domestic buyers
Export Analysis
DomesticPrice
WorldPrice
New DemandDomestic & World
“kink”
Domestic Sales Total Sales
Exports7 - 3 = 4
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
A
B
C
D
Domestic Buyerspay a higher pricelose B to Sellers
Domestic Sellersgain D from
world marketand gain B from domestic buyers
Export Analysis
DomesticPrice
WorldPrice
New DemandDomestic & World
“kink”
Domestic Sales Total Sales
Exports7 - 3 = 4
Consumers LoseProducers Win
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
Import Analysis
DomesticPrice
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
Import Analysis
DomesticPrice
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
Import Analysis
DomesticPrice
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
Import Analysis
DomesticPrice
WorldPrice
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
Import Analysis
DomesticPrice
WorldPrice
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
Import Analysis
DomesticPrice
WorldPrice
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
Import Analysis
DomesticPrice
WorldPrice
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
Import Analysis
DomesticPrice
WorldPrice
New SupplyDomestic & World
“kink”
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
Import Analysis
DomesticPrice
WorldPrice
New SupplyDomestic & World
“kink”
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
Import Analysis
DomesticPrice
WorldPrice
New SupplyDomestic & World
“kink”
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
Import Analysis
DomesticPrice
WorldPrice
New SupplyDomestic & World
“kink”
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
Import Analysis
DomesticPrice
WorldPrice
New SupplyDomestic & World
“kink”
Total Sales
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
Import Analysis
DomesticPrice
WorldPrice
New SupplyDomestic & World
“kink”
Total Sales
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
Import Analysis
DomesticPrice
WorldPrice
New SupplyDomestic & World
“kink”
Total Sales
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
Import Analysis
DomesticPrice
WorldPrice
New SupplyDomestic & World
“kink”
Domestic Sales Total Sales
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
Import Analysis
DomesticPrice
WorldPrice
New SupplyDomestic & World
“kink”
Domestic Sales Total Sales
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
Import Analysis
DomesticPrice
WorldPrice
New SupplyDomestic & World
“kink”
Domestic Sales Total Sales
Imports7 - 3 = 4
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
A
Import Analysis
DomesticPrice
WorldPrice
New SupplyDomestic & World
“kink”
Domestic Sales Total Sales
Imports7 - 3 = 4
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
A
B
Import Analysis
DomesticPrice
WorldPrice
New SupplyDomestic & World
“kink”
Domestic Sales Total Sales
Imports7 - 3 = 4
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
A
B
C
Import Analysis
DomesticPrice
WorldPrice
New SupplyDomestic & World
“kink”
Domestic Sales Total Sales
Imports7 - 3 = 4
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
A
B
C
D
Import Analysis
DomesticPrice
WorldPrice
New SupplyDomestic & World
“kink”
Domestic Sales Total Sales
Imports7 - 3 = 4
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
A
B
C
D
Import Analysis
DomesticPrice
WorldPrice
New SupplyDomestic & World
“kink”
Domestic Sales Total Sales
Imports7 - 3 = 4
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
A
B
C
D
Domestic Buyerspay a lower price
gain D from world sellers
and gain B from domestic sellers
Import Analysis
DomesticPrice
WorldPrice
New SupplyDomestic & World
“kink”
Domestic Sales Total Sales
Imports7 - 3 = 4
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
A
B
C
D
Domestic Buyerspay a lower price
gain D from world sellers
and gain B from domestic sellers
Domestic Sellerslose B to Buyers
Import Analysis
DomesticPrice
WorldPrice
New SupplyDomestic & World
“kink”
Domestic Sales Total Sales
Imports7 - 3 = 4
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
A
B
C
D
Domestic Buyerspay a lower price
gain D from world sellers
and gain B from domestic sellers
Domestic Sellerslose B to Buyers
Import Analysis
DomesticPrice
WorldPrice
New SupplyDomestic & World
“kink”
Domestic Sales Total Sales
Imports7 - 3 = 4
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
A
B
C
D
Domestic Buyerspay a lower price
gain D from world sellers
and gain B from domestic sellers
Domestic Sellerslose B to Buyers
Import Analysis
DomesticPrice
WorldPrice
New SupplyDomestic & World
“kink”
Domestic Sales Total Sales
Imports7 - 3 = 4
Consumers WinProducers Lose
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
Tariff Analysis
DomesticPrice
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
Tariff Analysis
DomesticPrice
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
Tariff Analysis
DomesticPrice
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
Tariff Analysis
WorldPrice
DomesticPrice
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
Tariff Analysis
WorldPrice
DomesticPrice
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
Tariff Analysis
WorldPrice
DomesticPrice
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
Tariff Analysis
WorldPrice
DomesticPrice
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
Tariff Analysis
WorldPrice
DomesticPrice
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
Tariff Analysis
WorldPrice
DomesticPrice
Tariff of 10
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
Tariff Analysis
WorldPrice
DomesticPrice
Tariff of 10
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
Tariff Analysis
WorldPrice
DomesticPrice
Tariff of 10
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
Tariff Analysis
PricewithTariff
WorldPrice
DomesticPrice
Tariff of 10
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
Tariff Analysis
PricewithTariff
WorldPrice
DomesticPrice
Tariff of 10
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
Tariff Analysis
PricewithTariff
WorldPrice
DomesticPrice
Tariff of 10
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
Tariff Analysis
PricewithTariff
WorldPrice
DomesticPrice
Tariff of 10
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
Tariff Analysis
PricewithTariff
WorldPrice
DomesticPrice
Tariff of 10
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
Tariff Analysis
PricewithTariff
WorldPrice
DomesticPrice
Tariff of 10
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
Tariff Analysis
PricewithTariff
WorldPrice
DomesticPrice
Tariff of 10
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
Tariff Analysis
PricewithTariff
WorldPrice
DomesticPrice
A
Tariff of 10
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
Tariff Analysis
PricewithTariff
WorldPrice
DomesticPrice
A
BTariff of 10
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
Tariff Analysis
PricewithTariff
WorldPrice
DomesticPrice
A
BC Tariff of 10
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
Tariff Analysis
PricewithTariff
WorldPrice
DomesticPrice
A
BC D Tariff of 10
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
Tariff Analysis
PricewithTariff
WorldPrice
DomesticPrice
A
BC D E Tariff of 10
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
Tariff Analysis
PricewithTariff
WorldPrice
DomesticPrice
A
BC D E F Tariff of 10
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
Tariff Analysis
PricewithTariff
WorldPrice
DomesticPrice
A
BC D E F
G
Tariff of 10
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
DomesticSupply
Tariff Analysis
PricewithTariff
WorldPrice
DomesticPrice
A
BC D E F
G
Tariff of 10
Consumers LoseProducers Win
Government WinsDeadweight Losses
Favor
Favorvariety
lower costscompetition
ideas
Oppose
Opposejobs
securityinfant
fairness
Should you retaliate?
Should you retaliate?
No
Trade isan innovation
Trade isan innovation
don’t need to make it if I can trade for it