MACROECONOMICS

Assignment On Chapter 5 International Trade

A) Assess the impact of IMPORTS, assuming that the world price is below the domestic price:

• If the world price is below the domestic price, what do imports do to the domestic supply of roses

• What does the increased supply of imported roses do to the domestic price of roses?

• What does the lower price do to domestic producers’ incentive to produce?

• What does a lower price do to the quantity demanded by domestic consumers?

• Does the amount of consumer surplus increase or decrease?

• What happens to domestic producer surplus?

B) Assess the impact of EXPORTS on domestic supply and demand, assuming that the world price is higher than the domestic price:

• If the world price is higher than the domestic price, what will domestic producers want to do?

• What does the quantity exported do to the domestic price?

• What does a higher domestic price do to the quantity consumed domestically?

• What has happened to the domestic consumer surplus?

• What has happened to the domestic producer surplus?