Figure 32-6 An Imported Good
An Imported Product
Now consider some other product—for example, computer RAM chips.
Once again, look first at the domestic demand and supply curves, shown
this time in Figure 32-6. The intersection of these curves determines the
price that would exist in Canada if there were no foreign trade.
Imports occur whenever there is excess demand domestically at the
world price. The domestic demand and supply curves are D and S,
respectively. The domestic price in the absence of foreign trade is
produced and consumed domestically. The world price of is less
than At the world price is demanded, whereas is supplied
domestically. The excess of domestic demand over domestic supply is
satisfied through imports.
If we now consider a situation with international trade, we must compare
the world price of RAM chips with the no-trade Canadian price. As
pd
Qd pw
pd. Q 2 Q 1