Basic Tariff analysis To determine the world price(Pw) and the quantity trade (Ow), two curves are defined: Home import demand curve Shows the maximum quantity of imports the Home country would like to consume at each price of the imported good. That is, the excess of what Home consumers demand over what Home producers supply: MD=D(P)-S(P Foreign export supply curve Shows the maximum quantity of exports Foreign would like to provide the rest of the world at each price. That is, the excess of what Foreign producers supply over what foreign consumers demand: XS=S(P-D*(P%) Copyright C 2003 Pearson Education, Inc Slide 8-9Copyright © 2003 Pearson Education, Inc. Slide 8-9 ▪ To determine the world price (Pw ) and the quantity trade (Qw), two curves are defined: • Home import demand curve – Shows the maximum quantity of imports the Home country would like to consume at each price of the imported good. – That is, the excess of what Home consumers demand over what Home producers supply: MD = D(P) – S(P) • Foreign export supply curve – Shows the maximum quantity of exports Foreign would like to provide the rest of the world at each price. – That is, the excess of what Foreign producers supply over what foreign consumers demand: XS = S*(P*) – D*(P*) Basic Tariff Analysis