ECON111 Lecture Notes - Lecture 7: Export Subsidy, Export Restriction, Economic Surplus
Week 7 Global Markets and Trade
Imports - the goods and services that we buy
Exports - the goods and services we sell
International Trade
- Comparative advantage drives trade between countries
- When you trade both countries are better off
- National comparative advantage = the ability for a nation to produce a good at
a lower opportunity cost than any other nation
- Comparative Advantage = the ability to produce at a lower opportunity cost
- Consumer surplus = maximum price willing to pay minus what you actually
pay (link the demand curve and the maximum price lines together)
- Producers surplus = minimum price willing to pay minus what you actually sell
(link the minimum price line and the supply curve)
- Import if the world price is lower and export if the world price is higher
Importing
Consumers gain from trade
Producers lose from trade
Free trade (compared to no trade)
= consumer surplus has increased
- Because consumers pay less
- Consumers get to buy more
= producers surplus has decreased
- Producers sell for less
- Producers sell less
= australia as a whole benefits
- Net gain from trade
- Surplus has increased
Exporting
Producers gain from trade
Consumers lose from trade
Free trade (compared to no trade)
= producers surplus increased
- Sell more
- Sell for more
= consumer surplus decreased
- Buy less
- Buy for more money
= Australia as a whole benefits
- Net gain from trade
- Surplus has increased
Winners and Losers
- International trade lowers the price of imported goods
- And raises the price of exported goods
- Buyers benefit from low prices
- Sells benefit from higher prices
- This is measured by the amount of surplus (highest surplus wins)
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Imports - the goods and services that we buy. Exports - the goods and services we sell. When you trade both countries are better off. National comparative advantage = the ability for a nation to produce a good at a lower opportunity cost than any other nation. Comparative advantage = the ability to produce at a lower opportunity cost. Consumer surplus = maximum price willing to pay minus what you actually pay (link the demand curve and the maximum price lines together) Producers surplus = minimum price willing to pay minus what you actually sell (link the minimum price line and the supply curve) Import if the world price is lower and export if the world price is higher. International trade lowers the price of imported goods. And raises the price of exported goods. This is measured by the amount of surplus (highest surplus wins) Increase exports in other industries e. g. coal.