Consider a market that, with no international trade, is initially in equilibrium with quantity demanded equal to quantity supplied at a price of $20. If the world price of the good is $10 and the country opens up to international trade then in this market

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When a country opens up to international trade and the world price is lower than the domestic price, domestic consumers will prefer to buy the good at the cheaper world price, leading to an increase in imports. As a result, the domestic price will fall to match the world price, and domestic producers will reduce their output due to the lower price, causing the quantity supplied to fall.

Consider a Market That, with No International Trade, Is Initially