Compare how exports and imports affect consumers and producers in a domestic economy.

What will be an ideal response?


Answers will vary but should include reference to consumer losses in the form of higher prices when exports are allowed and producer losses when imports enter the market through free trade. Exports raise the price of goods to that of the world price equilibrium, which is higher than the domestic equilibrium. This increases producer surplus but takes away from consumer surplus. The losses to consumers are offset by producer gains. Imports, on the other hand, hurt domestic producers but these losses are made up for by the benefits to consumers of lower-priced goods entering the market.

Economics

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What will be an ideal response?

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Economics