Isn’t free trade how all the world’s developed countries have become rich?
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2. Protectionism - Standard Level
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The winners from free trade
The losers from free trade:
Notice that Q1 is less than Qe.
This means that
fewer
cars are produced in the US
than would be without trade.
Domestic producers suffer due to the lower prices of imported cars.
Domestic producer surplus is less than it would be without trade.
Workers in domestic
factories may lose their jobs
, as output of American cars declines.
The
winners from free trade
Q3 is greater than Q1, indicating that consumers buy more cars after trade than they would without trade.
Pw
is lower
, indicating that consumers enjoy a lower price
and more consumer surplus
(the blue triangle)
than
before trade
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