International trade and payments Essay Example | Topics and Well Written Essays - 3000 words

International trade and payments - Essay ExampleIt illustrates on the point of Chinas growth on the rest of the solid ground economy.It is assumed that France is import grapes from the world market. The supply and demand curve of the country and the world market are given by the lines D and S respectively. The world trade worth is set at PW and PA is the equilibrium price of the importing price, i.e. France in this case. At price level Pw, the demand for grapes is OQ1 and the supply of grapes is OQ2. Q1Q2 accounts for the amount of shortage of grapes in the internal market. The amount of imports is also the same for France. As the world price of grapes is lower than the French price, this implies a improve off effect for the consumers as lower priced goods are available to them now. But there is a detrimental effect for the home(prenominal) producers. Now, they would have to produce at a lower price in ensnare to compete with the global price. Some of them would be even compel led to leave the market.The above figure depicts how imposition of obligation affects the economy. The French government imposes tax on imports of grapes. The world price of grapes is at Pw and on implementing tariff the price rises to Pw+t. Initially, Q1 and Q2 were the supply and demand for grapes in the world market, respectively. After tariff, Q3 and Q4 becomes the supply and demand respectively. Thus, imports shrink from Q1Q2 to Q3Q4. Imposing tariff has two beneficial effects. Firstly it adds to the revenue of the government. Secondly, it acts as a protection for the domestic producers, so that they behind produce more.Effect on Consumers Consumers in the importing country, in this case France, suffer a lessening in well being as a result of the tariff. Increase in the domestic prices of goods and run imported reduce the amount of consumer surplus in the market.Effect on Producers Producers in France experience in well being as a result of the tariff. Increase in prices o f their product in the domestic market increase their