International Trade

Rini Novrianti Sutardjo Tui

Equilibrium without Trading

Price

Quantity

Domestic demand

Domestic supply

Equilibrium quantity

Price of equilibrium

Consumer surplus

Producer surplus

Trade Determinant

Domestic price is opportunity cost in producing.

World price is the price applied in world market.

ProfitComparative

Edited by Foxit ReaderCopyright(C) by Foxit Corporation,2005-2009For Evaluation Only.

Exporting CountryPrice

Quantity

Domestic demand

Domestic supply

World price

Domesticdemand

Domesticsupply

Price before trading

Price after trading

Export

A

B

C

D

Importing CountryPrice

Quantity

Domestic demand

Domestic supply

Price before trading

Price after trading

Domesticdemand

Domesticsupply

Import

A

B

C

DWorld price

Trade Policies

Fare on imported goods decreases import quantity, increases domestic price, decreases consumer surplus.

Import quota decreases import quantity, increases domestic price, decreases consumer surplus.

Edited by Foxit ReaderCopyright(C) by Foxit Corporation,2005-2009For Evaluation Only.

Impact of Applying Fare on ImportPrice

Quantity

Domestic demand

Domestic supply

Price without

fare

Price with fare

World price

Import with fare

Equilibrium without trading

Fare

SQ1SQ2

DQ2SQ1

Import without fare

A

C

G

B

E FD

Impact on Applying Import QuotaPrice

Quantity

Domestic demand

Domestic supply

Import with quota

SQ1SQ2

DQ2DQ1

Import without quota

World price = price without

quota

Domestic price with quota

World price

Equilibrium with quota

Domestic demand+

Domestic importQuotaEquilibrium without quota

A

C

G

B

E FD E

Impact on Applying Export Quota

Price

QuantityDomestic demand

Domestic supply

Domestic supply-

Export

Quota

SQ1SQ2

DQ2DQ1

World price = price without

quota

Domestic price with quota

Export with quota

Export without quota

A

C

B

E

D

Limitation of Trading

Limitation of Trading

Arguments

Protection as bargaining

power

LabourNational security

Small industry

Unfair competition

Mineral Economics