4. Verbally and graphically describe the ONE economic condition that has to exist for buyers in an economy to buy a part the quantity they buy from sellers that produce the product in foreign economies (Importing) The one condition that has to exist, if buyers in Supply an economy choose to buy part of what they buy Curve from foreign sellers is the world price has to be lower than the equilibrium price if imports=0 Demand curve Note: the Difference between the world price and the equilibrium price without imports is the incentive for buyers to buy part of what they buy from foreign sellers (Le, Import) The distance between the Demand Curve and Supply curve at the world price is the quantity of the item that will be imported 5. Verbally and graphically describe a domestic market for some product in an equilibrium state as a NET IMPORTER of a product and indicate the gains to the domestic buyers and the losses to the domestic sellers When imports occur at the world price, the Supply price in the importing economy will fall to the curve world price and the quantity imported = the distance between the Demand curve and Supply curve at the world price. This drop in B price will reduce Producer Surplus by a value = Demand to area A, and increase Consumer Surplus by a curve value = A+B, therefore, the value of the net Amount imported gain of importing this item at the world price = the area 8 6. Verbally and graphically describe the consequences of the Government restricting the quantity of a product that can be imported by imposing an import tariff or imposing an import quota Principle 6.Verbally and graphically describe the S by US producers consequences of the Government restricting the quantity of a product that can be imported by imposing an import tariff of imposing en import Price with tariff quota The tariff will raise the price from world price D E Day US bupen to price with a tariff and imports will fall from length World price in blue line to length in red line. Consumer surplus fells by an area C+D+E+F, and Producer surplus moorts with twills increases by sees & and government collects tariff revenue area E, therefore Dead weight loss = area B+D Imports without tariffs