Answer to Question #225673 in Microeconomics for jenni

Question

Assume Thailand is a petroleum exporter on the global market. Draw the petroleum market in Thailand before and after international trade using a demand and supply graph (draw a graph), assuming the world price for petroleum is above the Thailand petroleum market before open for international trade. Identify and show (draw a graph) the change in consumer surplus, producer surplus, and total surplus seeing as Thailand is now open for international trade. Additionally, give some explanations for what happened.

Answer 1

This graph indicates Thailand's petroleum market condition before the international trade. Q is the Equilibrium quantity and P equilibrium price. Producer surplus tends to be represented by the section with the blue color while consumer surplus with yellow.

This graph illustrates Thailand's petroleum market after international trade. From the graph, Thailand's price tends to be lower compared to world's price. Based on the information, Producer surplus has increases while there is decrease in consumer surplus by the section E and C.