Question

www When China's clothing industry expands, the increase in world supply lowers the world price of clothing. Consider the effects this has on both an importer and an exporter of clothing. Suppose the following graph represents the market for clothing in Cambodia prior to the expansion of China's clothing industry, Cambodia is an of clothing because the world price is the domestic equilibrium price. Note: You will have to use green points (triangle symbol) and purple points (diamond symbol) to shade the consumer and producer surplus areas on the following graphs. There are two green points and two purple points per graph. Use either one point of both to most accurately indicate the areas. For example, if indicating the consumer surplus requires only one green point, leave the second one on the palette. Use the green point (triangle symbol) to shade consumer surplus in Cambodia before China's clothing industry expands. Then use the purple point (diamond symbol) to shade producer surplus. Market for Clothing in Cambodia Domestic Demand Domestic Supply Consumer Surplus Word Price cching Producer Surplus

Answer 1

cambodia is an exporter of clothing because the world price is greater than the domestic equilibrium price. Consumens Surplus is the area below the demand curve and above the price. producers surplus is the area below the price and above the supply curve. market for clothing in Cambodia price (Domestic Deinand LAN Domestic SUPPLY world price - Guantity c.s= A P.s=Btc market for clothing in Cambodia price Domestic supply Domestic Pemand -New world price Guantity New cos= a New P. sbtk

Australia is an importer the world price is less equilibrium price. . of clothing because than the domestic market for clothing in Australia price Domestica Domestic Supply Demand world price - Quantity c.s= A + B and Pos=0 market for clothing in Australia price Domestic Pemand Domestic Supply world price & Quantity New e.s= ath and New P. s e overall, exporting countries are worse off due to the fall in the world price of clothing (as decrease in Pis increase in eis. so Total surplus decreases). Importing countries are better off due to the brice change as increase in cost decrease in pos so total surpws incho