How Does International Trade Affect Domestic Producers and Consumers?

2717 WordsAug 28, 201311 Pages
How does international trade affect domestic producers and consumers? In my paper I will attempt to explain the complex relationship between suppliers and consumers and how international trade, the exchange of good between two different countries, affects this. A market is defined as a group of buyers and sellers of a particular product or service. Competitive markets are markets with many buyers and sellers, so that each has a very small influence on the price. Supply and demand is the most useful model for a competitive market, and shows how buyers and sellers interact in that market. The demand for a product is the amount that buyers are willing and able to purchase. Quantity demanded is the demand at a particular price, and is…show more content…
As the prices of inputs such as labor, raw materials, and capital increase, production tends to be less profitable, and less will be produced. This leads to a decrease in supply. Technology relates to methods of transforming raw materials to finished goods. Improvements in technology will reduce the costs of production and make sales more profitable so it tends to increase the supply. The last factor effecting supply is expectations. If firms expect prices to rise in the future, they may try to produce less now and more later. The relationship between the price of a product and the quantity supplied, holding all other things constant is generally sloping upwards. Supply is represented by the entire curve and not just one point on the curve. When the price of the product changes, the quantity supplied changes, but supply does not change. When cost of production changes, supply will change, and the entire supply curve will shift. Market Supply is the summation of all the individual supply curves. In general, the more firms producing a product, the greater the market supply. When quantity supplied at a given price decreases, this is generally caused by an increase in the cost of production or decrease in the number of sellers. An increase in wages, cost of raw materials, cost of capital, can also decrease supply. Weather may also affect supply, if the raw materials are perishable or unattainable due to transportation problems. We can analyze how markets
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