Gains From Trade Using Supply And Demand Analysis

Gains from trade using supply and demand analysis The diagram shows japan can produce camcorders at lower cost - its supply curve is lower than the UK. This means that Japan has a comparative advantage in producing camcorders. In the absence of external trade between the two countries, British consumers would have to debauch at a high equilibrium charge than Japanese consumers. Since Japan is much efficient, it makes sense for Japan to specialise in production of camcorders and export their surplus output to the UK at a lower free trade price.

At the intermediate price shown in the diagram, (the free trade price) Japan sells exports to the UK for a higher price but this is still lower than the UK equilibrium price. Japan receives revenue from the sale of these exports. UK consumers can now buy to a greater extent camcorders at a lower price and have more choice in the market We are ignoring transportation cost between the two countries and we are assuming that the resources th...If you want to maintain a full essay, order it on our website: Ordercustompaper.com

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