Alright, now let's see a situation where we'll be importing. So let's see what happens when the world price is less than the domestic price. We're going to have a low world price now here. Okay. So let's go straight to the graph, and we'll see that we've got our domestic demand here and domestic supply, right? This graph still represents our domestic market, but now the difference is that we've got this world price, right? So this was our original equilibrium here. P^* \text{ and } Q^*, right? Our quantity axis and our price axis but now we open up to international trade, and we find out that in this market the world price is lower than the price when we didn't trade, right? So now that we're at this lower world price, what's going to happen? Who's going to be happy? Who's going to be sad about this price, right? Let's think about the consumers. The price went down, consumers are happy, right? They're going to demand more and that's what we see happening here. It's going to cross the demand curve way out here, right? So we're going to see that the quantity demanded has increased from our original equilibrium and our quantity supplied, as we would expect, has decreased, right? So up to this point, we would see that this low price would have caused a shortage, right? We've got this shortage between the quantity demanded and the quantity supplied. Right? But now that we've opened up to international trade, this shortage can be filled in by producers outside the US, right? So we could find producers in other countries that want to send their product to us, and we'll buy it here in the US. So we're going to have this situation where we're importing. Right? So when we have a domestic quantity shortage here on the right, that's when we're going to import. Right? So imports are going to be goods that are produced overseas but sold domestically right? So we don't produce them here, but they do get sold inside our country. Cool? So let's go ahead and see what happens here. Oh, and just to reiterate, this distance between these two, right, from the quantity supplied domestically to the quantity demanded, this is going to be the amount of the imports, right? The amount of that shortage is going to be the amount that we want to import. Cool? So let's go ahead and analyze consumer surplus and producer surplus in this situation. So we're going to have a b, c, d, and e here. Cool? So just like before we had our original consumer and producer surplus that we're used to right? We had this section for our whoops, for our consumer surplus right above the price but below the demand curve, and this was a section for our producer surplus before we started trading, right? This is something we're used to, and we'll see that the consumer surplus was just A and the producer surplus was this B plus E, right? So our total surplus in this situation was A plus B+E. Cool? Alright so now I'm going to erase this, and let's reshade this based on the international trade, right? What's going to happen after we start trading? Well, let's first talk about consumer surplus, right? What's going to happen to consumer surplus? It's going to be everything above the price, but below the demand curve, and just like we saw with the exports right here with the imports, we're going to increase our surplus quite a bit here. Right? The surplus is going to go all the way out here to where the demand curve touches the price, and we're going to get this big triangle, right? So, in this case, when we're importing, the consumers are pretty happy about it, right? Because we got this low price, They're able to get more of this product at this lower price. So the consumers are pretty happy, and we're going to see that the consumer surplus went up to a plus b plus c+d, right? So they've gotten this extra area into their surplus. Part of it came from the producers, right? The B, but the c+ was nobody's surplus before. So plus b+c+d, right? Their change was a positive change of all those areas. And how about the producers? In this case, it's going to be everything below the price but above the supply curve, right? And that's going to be just this little area of E, right. So they've lost some of their surplus to the consumers, but this is what they have left in E. Cool. So they lost B, right. So what's happened to our total surplus here, it now includes all of this area, right. So we've got A plus B plus c plus d plus e. Right? So it's gained this section C plus D, and you'll see that this is very similar to our conclusion in exports right? Now here, I'm going to scroll up back to exports real quick just so you don't get confused because in exports we got this just plus D section, but what happened is when I did the imports I kind of split that D into 2 sections so it got a C plus D. In the end, what happened is we got this extra area right? So in both cases what we see is that the gains from trade right, have exceeded the losses to the person who lost some of their surplus. So in both cases, the nation ends up being better off, right? This is just going to be the opposite of what happened with exports of who's better off and who's worse off. So let's make those conclusions now. So we see that importing has made a country's consumers better off, right? They love the lower price and the quantity that they can get at that lower price, and the producers are worse off, right? They've lost some of their surplus. The price is lower. They're not producing as much as they were. But we see that the nation is better off because the gains to the consumers exceed the losses to the producers, right? So you can see this is kind of the opposite that happened above with the exports, but in both cases, we see that the nation ends up being better off as a whole. Cool? So let's go ahead and do a practice problem and then we'll move on, alright? Let's do that now.