Question

Discuss whether consumers will gain or lose from trade in the following cases below:________

a) The importing country when the market is perfect competition (3 points)
b) The exporting country when the market is perfect competition (3 points)

Answer 1

a. Gain

b. Lose

Step-by-step explanation:

a. The consumers in Importing country will gain in a perfect competition because imports by the country will increase the variety of products available and in a perfect competition every seller have the equal chance to sell its goods, so in order to increase sales the sellers may reduce prices which will result in a gain for the consumers.

b. The consumers in exporting country will lose in a perfect competition because the country is exporting the goods to another country and so the country exporting the goods will be left with limited goods and due to equal demand the prices will remain same or may increase if demand is increased which will result in a loss for the consumers of goods in a exporting country.