Alright. Let's try the first situation. Here we're going to see where the world price is higher than the domestic price. Okay? So let's see what happens when we have a high world price. Here we've got the same kind of graph we had above, except now this red line is going to indicate the world price, right? So if we look here, this was our original quantity, right, and our original price when we were in autarky, right, when there was no trade allowed internationally. So here we still have our domestic supply and our domestic demand, right, so we're going to be focusing on this domestic market in this situation where they're trading internationally, right? So if we had this price and quantity and now we opened up to international trade and we found out that in this market, the world price was something higher than our equilibrium price in the country, right? So remember now that we have this high world price and we are trading internationally, this world price is the price that's going to prevail on the market. Okay, so let's go ahead and see what happens at this price, right? We've seen what happens with high prices before, right? So it's kind of going to follow in that same suit here, so let's see what happens. This first spot right here where the world price touches the demand curve, right, that's going to be the quantity demanded, once we open up to international trade and remember that's the domestic quantity demanded, so the people the consumers in our country demand this much quantity at the higher price, right? And we would expect that. We would expect the quantity demanded to go down because the price went up, right? So what do you think happened to quantity supplied? If the price goes up, we would expect quantity supplied to increase too, right? Because supply increases with price. So let's go ahead and see that and that's going to be this dot right here right where the world price touches the supply curve. We're going to get the quantity supplied in this example. So we've seen this before right where the price was higher than equilibrium and in this case just like we see here the quantity supplied is greater than the quantity demanded, right. So before we would see this and we would think that it was a surplus, right. We would see this surplus and we talked about it being all these inefficiencies, right? We were putting too many resources into this market, we needed to be at equilibrium, but now let's see what happens when we have international trade. This surplus can be sold in other countries, right? We have these extra units. Now the people in our country don't want to buy them, but there are people in other countries that are willing to pay this world price, for this surplus, right? For these extra units that we're not going to be able to sell here. So what ends up happening is that the same surplus, that distance between here and here, that ends up being exported. These become exports, right? So exports, we've got our definition here on the right. Well first here, domestic quantity surplus, so whenever we have this surplus right in the domestic market, we can turn those into exports if we're trading internationally, right? So these exports, they're goods that are produced domestically here at home, but sold overseas, right? Sold in another market, in some other market. Cool? So that's kind of what we're going to be dealing with here and now what we want to do is be able to analyze what's happened to our surplus, our consumer surplus, and our producer surplus in this situation, right? What has this done to our surpluses? So I'm going to label the graph, in all these different little sections. So I'll call this section up here A, this section right here B, C, and then we'll have, D right here, E, and F. Cool? Alright. So let's go ahead and say which section goes where. So before we started trading internationally, we were in that situation of autarky, right, and we could see that our consumer surplus before, right? It was at our equilibrium price, so our original surplus was this triangle, right? And I'm going to ask you not to shade stuff in yet because I'd rather you shade it in, once we get to the once we do start trading, right? I'm just showing you the before situation and then I'm going to erase this. This. So that was the consumer surplus that we were used to, right? Everything above the equilibrium price and under the demand curve, right? So that was just section A plus B plus C. That was our consumer surplus and we saw that our producer surplus was everything below the price but above the supply curve, right? So it was that triangle kind of like we're used to. That standard case here and that's just E plus F, right? So in this this situation our total surplus was that A plus B + C + F. Right? So all those sections are part of our surplus. I'm going to go ahead and erase this now and then we're going to reshade for our after trading, right? So now we've opened up trade, the world price is higher, right? So we've got this situation where we're going to be exporting goods. So what's going to happen here to our consumer surplus? So remember Consumer Surplus is everything above price and below the demand curve. In this case, the price is the world price, right? So what's going to be that section? It's going to be everything above the world price and below the demand curve right? So it's going to be this little triangle right here. It's just A now and that makes sense right because the price went up, we would expect consumer surplus to decrease and that's exactly what's happened here. We see that consumer surplus is just A now. So here what's happened is we've lost B plus C from consumer surplus, right? They've lost those sections of the surplus, but let's see what's happened to producer surplus. Now producer surplus is going to be everything below the price, but above the supply curve, right? So in this case, we've got below the price is going to be all of this, but look how much it extends now. It's going to go all the way out here, right? Because that's all below the price and we did produce all those units, right? We've produced all the units all the way including that area of D. So we see that the producer surplus has increased here right? So producer surplus on top of being E plus F is now B plus C plus D plus E plus F, right? So producer surplus has increased significantly here, right? They took some of that
surplus from the consumers from the higher price, but they also added a little extra surplus there in section D. So you'll see that producer surplus has gone up B plus C plus D right? So they got even a little more than what the consumers lost here, right? So here's our grand finale of our exporting situation is that now our surplus includes D, right? Our total surplus has increased for this economy. So plus D, right? So something that was not surplus before we started trading, we now have that as surplus and remember when we were talking about trading in the comparative advantage in the right, we saw that we were able to reach points outside of 위치.article because of these gains from trade and this is exactly what we're seeing here in the international trading example is that our surplus has increased past the point we could have done it just with our domestic demand and supply. Cool? So our surplus is even higher here in the situation of international trade. Let me get out of the way so we can fill in these little conclusions here at the bottom. So we've got this that in exporting, exporting is going to make a country's producers better off, right? And that's what we see here that the producer surplus has increased significantly and the consumer surplus has decreased, right? The consumers are worse off, right? So there's always going to be winners and losers here, but what we see in this situation is that the gains to the producers are bigger than the losses to the consumers, right? So in total, our nation is going to be better off as a whole, right? So that's about it for exports. Why don't we go on to the next video, we're going to talk about imports And you're going to see that we're going to reach a lot of the same conclusions, but it's kind of going to be backwards. So let's go ahead and do that in the next video.