Economics
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Why does trade of any type take place?
Trade is vital part of the world economy it allows for consumers and producers to benefit in terms of utility maximization and profit maximization. Hence market exchange and trade benefits both consumers and producers.
In market exchange price is determined by demand and supply taking for example the lower diagram :
At equilibrium in the market, the market price is set as 10$ per unit. However changes in economic determinants such as:
Income levels, amount of consumers in the economy, taste and preferences, consumer expectations. May cause the market demand and supply curve to shift resulting in a change in equilibrium price.
Consumers gain a surplus from market exchange because the maximum amount they would be willing to pay for each unit of the good exceeds that amount contrained by market price.
Producers also receive a net benefit or a surplus from market exchange because the amount they receive for their ouput exceeds the minimum amount they would require to supply of that good in the short run.
At higher prices producer surplus is greater because firms sell their output for a higher price even thought they would have been willing to offer most of it at a lower price.
Note that producer surplus is the difference between producers total revenue and Total variable cost...