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A-Level Economics · Free trade at the world price (imports) diagram question

Why does opening this market to trade make domestic CONSUMERS better off?

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The diagram

The answer

They pay the lower world price PW and buy a larger quantity — Q₃ instead of Q₁. Lower price, higher quantity — consumer surplus expands. In an importing sector consumers are the winners. PW sits below the autarky price P₁ because it reflects the comparative advantage of the world's lowest-opportunity-cost producers. Consumers pay less AND buy more (Q₁ up to Q₃), so consumer surplus expands materially. Domestic producers lose — but the consumer gain outweighs the producer loss.

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This is one of 6 questions on the free trade at the world price (imports) diagram — every corner lettered, every wrong answer diagnosed.

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