Market situation in the domestic production only

Producer surplus – the difference between the lowest price the producer would be willing to sell the good and the price the producer actually sold it for. It is the area above the supply curve and below the equilibrium price.

1) Where is the domestic supply curve? ______________

2) Where is the domestic demand curve? _____________

3) What is the domestic equilibrium price? ___________

4) What is the domestic equilibrium quantity? _________

5) What is the area of consumer surplus? ____________

6) What is the area of producer surplus? _____________

Consumer surplus – the difference between the maximum price consumers are willing to pay (the demand curve) for a goods or services and the price they have to pay (equilibrium price). It is the area above the equilibrium price and below the demand curve

2. Market situation in the free trade: foreign competition enters the market

1) Where is the world free-trade foreign supply curve? ___________

2) What is the world price and the world quantity when there is foreign competition? _____________________

3) What is the quantity the domestic producers supply? ______________

4) What is the quantity the domestic consumers demand? ____________

5) What is the quantity the foreign producers suppliy (the quantity of imports)?

________________________________________________

6) What is the area of domestic consumer surplus at the world price? _________

7) What is the area of domestic producer surplus at the world price? _________

Please, compare both market situations.

1. Market price _________________________________________________

2. The quantity the domestic producers supply ________________________

3. The quantity the domestic consumers demand _______________________

4. Domestic consumer surplus ______________________________________

5. Domestic producer surplus _____________________________________

Please, fill in the blank.

Domestiс consumers get _________(more, less) output at __________ (lower, higher) prices. In this market situation the domestic quantity supplied ___________ (increases, decreases) from the point ____ to the point _____, that is from _____ units to _____ units.

Let’s take a look at consumer surplus. When the products is produced only domestically, the consumer benefits by the area of _____________. When the competition expands to the rest of the world, the consumer surplus expands to the area ________. The lost of the domestic producer surplus equal to the the area ____________ is now picked up by the domestic consumer. Net social surplus of the domestic consumer resulting from the international trade is the area ________!!!

Now we will look at the domestic producer surplus. Notice that when there was only domestic production, the domestic producer surplus was the area __________. When world producers enter the market, the domestic producer surplus _________ (drops, grows up) to the area ____________. Do you think this makes the domestic producer happy? ________.

Please, answer the questions.

1) Who benefits from free trade and world competition? ______________________________________________________________

2) Who is hurt by world competition?

______________________________________________________________

3) What is the area of the gain for the domesticconsumers after foreign competition enters the market? ____________________________________

4) What is the area of the loss for the domesticproducers after foreign competition enters the market? ____________________________________

5) What is the area of the gain that domesticconsumers get at the expence of the domesticproducers after foreign competition enters the market? _________

6) What is the area of net social benefit to the domestic consumers? ______

Дата добавления: 2015-11-14