Figure 2 International Trade in an Exporting Country FIGURE 2 Before Trade After Trade Change International Trade in an Consumer Surplus A + B A -B Exporting Country Producer Surplus C B + C+D + (B + D) Once trade is allowed, the domestic price rises to equal Total Surplus A + B + C A + B +C+D the world price. The supply curve shows the quantity of The area D shows the increase in total textiles produced domestically, surplus and represents the gains from trade. and the demand curve shows the quantity consumed Price of domestically. Exports from Textiles Isoland equal the difference Domestic between the domestic Price supply quantity supplied and the after A Exports domestic quantity demanded trade World at the world price. Sellers are B D price better off (producer surplus Price rises from C to B + C + D), before C and buyers are worse off trade (consumer surplus falls from A + B to A). Total surplus Domestic Exports rises by an amount equal to demand area D, indicating that trade Domestic Quantity of raises the economic well-being Domestic quantity quantity Textiles of the country as a whole. demanded suppliedFigure 3 International Trade in an Importing Country FIGURE 3 Before Trade After Trade Change International Trade in an Consumer Surplus A A+B +D + (B + D) Importing Country Producer Surplus B + C C -B Once trade is allowed, the Total Surplus A +B + C A + B +C+D + D domestic price falls to equal the world price. The supply curve shows the amount The area D shows the increase in total surplus produced domestically, and and represents the gains from trade. the demand curve shows the amount consumed Price of L domestically. Imports equal Textiles the difference between the domestic quantity demanded Domestic and the domestic quantity supply supplied at the world price. Buyers are better off A (consumer surplus rises from A to A + B + D), and sellers Price .mmmmmmmmm before trade are worse off (producer surplus falls from B + C to C). Total Price World surplus rises by an amount after trade C price equal to area D, indicating Imports Domestic that trade raises the economic demand well-being of the country as a whole. Domestic Domestic Quantity of quantity quantity Textiles supplied demandedFigure 4 The Effects of a Tariff FIGURE 4 A tariff, a tax on imports, reduces the quantity of imports and moves a market closer to the equilibrium that would exist without trade. Total surplus falls by an amount equal The Effects of a Tariff to area D + F. These two triangles represent the deadweight loss from the tariff. Before Tariff After Tariff Change Consumer Surplus A + B +C +D +E +F A + B -(C + D + E + F) Producer Surplus C+G + C Government Revenue None E E Total Surplus A+B+C+D+E+F+G A+B+C+ E+G (D + F] The area D + F shows the fall in total surplus and represents the deadweight loss of the tariff. Price of Textiles Domestic supply 4 Equilibrium without trade Price with tariff Tant D E Price World without tariff G Imports price Domestic with tariffl demand Quantity of Textiles Imparts without tariff