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A-Level Economics · World price above equilibrium (exports) diagram question

In an EXPORTING sector, who gains and who pays more?

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The diagram

The answer

Producers gain — they sell at the higher world price; domestic consumers now pay that world price too. Producers sell to the world at a much higher price and gain a large producer surplus. What annoys domestic consumers is that the world now sets the price they pay. In an exporting sector the producer gains and the consumer loses; in an importing sector it is the other way round. UK law and education are the everyday case: salaries and prices in the sectors the UK exports are set by the global market, which is why legal help and private schooling are so expensive for UK buyers.

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This is one of 6 questions on the world price above equilibrium (exports) diagram — every corner lettered, every wrong answer diagnosed.

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