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When China's clothing industry expands, the increase in world supply lowers the world price of clothing. Consider the effects this has on both an importer and an exporter of clothing. Suppose the following graph represents the market for clothing in Germany prior to the expansion of China's clothing industry. Germany is an (IMPORTER OR EXPORTER)   of clothing because the world price is  (ABOVE OR BELOW)  the domestic equilibrium price.

When China's clothing industry expands, the increase in world supply lowers the world price of clothing. Consider the effects this has on both an importer and an exporter of clothing. Suppose the following graph represents the market for clothing in Germany prior to the expansion of China's clothing industry. Germany is an (IMPORTER OR EXPORTER)   of clothing because the world price is  (ABOVE OR BELOW)  the domestic equilibrium price.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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When China's clothing industry expands, the increase in world supply lowers the world price of clothing. Consider the effects this has on both an importer and an exporter of clothing.
Suppose the following graph represents the market for clothing in Germany prior to the expansion of China's clothing industry. Germany is an (IMPORTER OR EXPORTER)   of clothing because the world price is  (ABOVE OR BELOW)  the domestic equilibrium price.
### Market for Clothing in Germany **Instruction:** Use the green point (triangle symbol) to shade consumer surplus in Germany before China's clothing industry expands. Then, use the purple point (diamond symbol) to shade producer surplus. **Graph Explanation:** The graph represents the market for clothing in Germany and includes the following elements: - **Axes:** - The vertical axis represents the Price of Clothing. - The horizontal axis represents the Quantity of Clothing. - **Lines:** - **Domestic Demand (Blue Line):** This downward-sloping line shows the relationship between the price of clothing and the quantity demanded by consumers in Germany. - **Domestic Supply (Orange Line):** This upward-sloping line represents the relationship between the price of clothing and the quantity supplied by domestic producers in Germany. - **World Price (Black Line):** A horizontal line indicating the constant price level set by the global market. - **Surplus Areas:** - **Consumer Surplus (Green Triangle):** Indicates the area above the world price and below the demand curve. It represents the benefit to consumers, who are able to purchase clothing at a price lower than they were willing to pay. - **Producer Surplus (Purple Diamond):** The area below the world price and above the supply curve. It denotes the benefit to producers who can sell their clothing at a price higher than their minimum acceptable price.
Transcribed Image Text:### Market for Clothing in Germany **Instruction:** Use the green point (triangle symbol) to shade consumer surplus in Germany before China's clothing industry expands. Then, use the purple point (diamond symbol) to shade producer surplus. **Graph Explanation:** The graph represents the market for clothing in Germany and includes the following elements: - **Axes:** - The vertical axis represents the Price of Clothing. - The horizontal axis represents the Quantity of Clothing. - **Lines:** - **Domestic Demand (Blue Line):** This downward-sloping line shows the relationship between the price of clothing and the quantity demanded by consumers in Germany. - **Domestic Supply (Orange Line):** This upward-sloping line represents the relationship between the price of clothing and the quantity supplied by domestic producers in Germany. - **World Price (Black Line):** A horizontal line indicating the constant price level set by the global market. - **Surplus Areas:** - **Consumer Surplus (Green Triangle):** Indicates the area above the world price and below the demand curve. It represents the benefit to consumers, who are able to purchase clothing at a price lower than they were willing to pay. - **Producer Surplus (Purple Diamond):** The area below the world price and above the supply curve. It denotes the benefit to producers who can sell their clothing at a price higher than their minimum acceptable price.
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