Refer to the figure above. The graph represents consumers and suppliers in a country that relies on imports. Curve D is domestic demand, Curve S is domestic supply and Curve I is the import supply curve. If the country allows imports, the amount of imports demanded from world producers is ________. A) (q₀- 0) B) (q₂- q₁) C) (q₀- q₂) D) (q₀- q₁)

Question

Quizplus · Accepted Answer

When the country allows imports, the imports demanded from world producers can be calculated as the difference between the quantity demanded by domestic consumers (point B1) and the quantity supplied by domestic suppliers (point U1) at the world price (point P0), which is equal to qS1U1B10S1U1B1. Then, we subtract from this the quantity that would have been supplied by domestic suppliers in the absence of imports (point U1B1), which is equal to qS1U1B11S1U1B0, to obtain the answer: qS1U1B10S1U1B1S1U1B0 - qS1U1B11S1U1B0.

Refer to the Figure Above