When China's clothing industry expands, the increase in world supply lowers the world price of clothing. Consider the effects this has on both an importer and an exporter of clothing.

Suppose the following graph represents the market for clothing in Germany prior to the expansion of China's clothing industry. Germany is an of clothing because the world price is the domestic equilibrium price.

Note: You will have to use green points (triangle symbol) and purple points (diamond symbol) to shade the consumer and producer surplus areas on the following graphs. There are two green points and two purple points per graph. Use either one point of both to most accurately indicate the areas. For example, if indicating the producer surplus requires only one purple point, leave the second one on the palette.

Use the green point (triangle symbol) to shade consumer surplus in the Germany before China's clothing industry expands. Then use the purple point (diamond symbol) to shade producer surplus.

Market for Clothing in Germany

Consumer Surplus

Producer Surplus

Price of Clothing

Quantity of Clothing

Domestic Demand

Domestic Supply

World Price

On the following graph, use the green point (triangle symbol) to shade consumer surplus in Germany after China's clothing industry expands. Then use the purple point (diamond symbol) to shade producer surplus.

Market for Clothing in Germany

Consumer Surplus

Producer Surplus

Price of Clothing

Quantity of Clothing

Domestic Demand

Domestic Supply

New World Price

Suppose the following graph represents the market of clothing in Cambodia prior to the expansion of China's clothing industry. Cambodia is an of clothing because the world price is the domestic equilibrium price.

Use the green point (triangle symbol) to shade consumer surplus in Cambodia before China's clothing industry expands. Then use the purple point (diamond symbol) to shade producer surplus.

Market for Clothing in Cambodia

Consumer Surplus

Producer Surplus

Price of Clothing

Quantity of Clothing

Domestic Demand

Domestic Supply

World Price

On the following graph, use the green point (triangle symbol) to shade consumer surplus in Cambodia after China's clothing industry expands. Then use the purple point (diamond symbol) to shade producer surplus.

Market for Clothing in Cambodia

Consumer Surplus

Producer Surplus

Price of Clothing

Quantity of Clothing

Domestic Demand

Domestic Supply

New World Price

Overall, countries benefit from the fall in the world price of clothing, while countries are harmed by the price change.