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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?
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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