**Title: Understanding Consumer and Producer Surplus in Kenya's Wheat Market****Overview:**This educational resource examines the impact of open trade on Kenya's wheat market, focusing on consumer surplus (CS) and producer surplus (PS) when free trade is allowed at the world price level.**Graph Analysis:**The graph presented shows the domestic wheat market in Kenya with the following key elements:- **Axes:** - The vertical axis represents the price in dollars per ton, ranging from $160 to $430. - The horizontal axis indicates quantity in thousands of tons of wheat, spanning from 0 to 50.- **Lines:** - **Domestic Demand** (blue line): Slopes downward from left to right, illustrating that as price decreases, quantity demanded increases. - **Domestic Supply** (orange line): Slopes upward, indicating that higher prices incentivize greater quantity supplied.- **World Price Line (Pw):** - A horizontal line at $250, denoting the world price of wheat per ton, which Kenya uses when open to trade.**Shaded Areas:**- **Consumer Surplus (CS):** - To be shaded using a green triangle symbol, representing benefits consumers receive when they pay less than what they are willing to pay.- **Producer Surplus (PS):** - To be shaded with purple diamond symbols, indicating the additional benefit producers receive when they sell at a market price higher than their minimum acceptable price.**Questions for Exploration:**1. **Import Analysis:** - When Kenya engages in international trade at the world price, how many tons of wheat will it import? 2. **Tariff Impact:** - Consider a scenario where Kenya imposes a $30 tariff on each imported ton of wheat. Calculate the new price consumers will pay and determine the change in import quantity.**Interactive Component:** Participants are encouraged to consider the effects of these changes and visualize how the shaded areas of CS and PS are impacted by the tariff introduction.**Conclusion:**This examination aids in understanding the economic dynamics of open markets and the implications of tariffs on consumer and producer welfare within Kenya's wheat market. **Educational Resource: Understanding Tariffs in Economic Graphs**### Graph Explanation:The graph displays the economic impact of tariffs on the wheat market, using supply and demand curves. Here's a detailed breakdown:- **Axes:** - The x-axis represents the "QUANTITY" of wheat in thousands of tons. - The y-axis represents the "PRICE" in dollars per ton ($/ton).- **Curves:** - The **blue line** indicates "Domestic Demand." - The **orange line** shows "Domestic Supply."- **Price Level:** - The **black line** (plus symbol) marks the "World Price Plus Tariff" ($ P_W $).### Surplus and Revenue Areas:1. **Consumer Surplus (CS):** - Identified by green triangles (triangle symbols).2. **Producer Surplus (PS):** - Denoted by purple triangles (diamond symbols).3. **Government Revenue:** - Represented by orange quadrilaterals (square symbols).4. **Deadweight Loss (DWL):** - Shaded with tan triangles (dash symbols), indicating net loss due to the tariff.### Table and Analysis:Complete the table with data from the graph analysis:- **Under Free Trade** vs. **Under a Tariff:** - **Consumers’ Surplus:** - **Producers’ Surplus:** - **Government Revenue:** - Set to 0 under "Free Trade."Based on your analysis, the impact of the tariff on Kenya’s market includes:- A decrease in consumers’ surplus by \$____.- An increase in producers’ surplus by \$____.- Government collects \$____ in revenue.- Overall, the net welfare effect is a loss of \$____.

Consumer surplus is the area below demand curve and above supply curve. Producer surplus is the area…

Use the black line (plus symbol) to indicate the world price plus the tariff. Then, use the green triangle (triangle symbols) to show the consumers' surplus with the tariff and the purple triangle (diamond symbols) to show the producers' surplus with the tariff. Lastly, use the orange quadrilateral (square symbols) to shade the area representing government revenue received from the tariff and the tan triangles (dash symbols) to shade the areas representing the net loss or deadweight loss (DWL) caused by the tariff. PRICE (Dollars per ton) 460 430 400 370 340 310 280 250 220 190 160 Domestic Demand 05 Domestic Supply 10 15 20 25 30 35 40 QUANTITY (Thousands of tons of wheat) Consumers' Surplus Producers' Surplus Government Revenue 45 50 World Price Plus Tariff CS PS Government Revenue Based on your analysis, as a result of the tariff, Kenya's consumers' surplus by S and the government collects S Complete the following table to summarize your results from the previous two graphs. Under Free Trade (Dollars) Under a Tariff (Dollars) DWL by S producers' surplus in revenue. Therefore, the net welfare effect is a

Use the black line (plus symbol) to indicate the world price plus the tariff. Then, use the green triangle (triangle symbols) to show the consumers' surplus with the tariff and the purple triangle (diamond symbols) to show the producers' surplus with the tariff. Lastly, use the orange quadrilateral (square symbols) to shade the area representing government revenue received from the tariff and the tan triangles (dash symbols) to shade the areas representing the net loss or deadweight loss (DWL) caused by the tariff. PRICE (Dollars per ton) 460 430 400 370 340 310 280 250 220 190 160 Domestic Demand 05 Domestic Supply 10 15 20 25 30 35 40 QUANTITY (Thousands of tons of wheat) Consumers' Surplus Producers' Surplus Government Revenue 45 50 World Price Plus Tariff CS PS Government Revenue Based on your analysis, as a result of the tariff, Kenya's consumers' surplus by S and the government collects S Complete the following table to summarize your results from the previous two graphs. Under Free Trade (Dollars) Under a Tariff (Dollars) DWL by S producers' surplus in revenue. Therefore, the net welfare effect is a

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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