On the following graph, use the green point (triangle symbol) to shade consumer surplus in Germany after China's clothing industry expands. Then use the purple point (diamond symbol) to shade producer surplus. 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(IMPORT OR EXPORT) of clothing because the world price is(ABOVE OR BELOW) the domestic equilibrium price. # Market for Clothing in Germany### Graph Explanation:This diagram represents the market for clothing in Germany, illustrating the interplay between domestic supply and demand, and its interaction with international trade through the new world price.- **Axes:** - The vertical axis represents the "Price of Clothing." - The horizontal axis represents the "Quantity of Clothing."- **Lines:** - The **Domestic Demand** curve (blue line) slopes downward, indicating that as the price of clothing decreases, the quantity demanded increases. - The **Domestic Supply** curve (orange line) slopes upward, showing that as the price increases, the quantity supplied increases. - The **New World Price** is a horizontal black line, indicating a constant price level determined by international markets.- **Surplus Areas:** - The **Consumer Surplus**, represented by a green area marked with a triangle, shows the benefit consumers receive when they purchase a product for a price less than the maximum they are willing to pay. - The **Producer Surplus**, illustrated by a purple area marked with a diamond, represents the benefit producers receive when they sell a product for a price higher than the minimum they are willing to accept.This diagram helps in understanding how global pricing affects domestic markets, and how surpluses are distributed between consumers and producers when trading internationally.

The receiving country in export from the supplying country is referred to as an import. The defining…

Answered: When China's clothing industry expands,…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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On the following graph, use the green point (triangle symbol) to shade consumer surplus in Germany after China's clothing industry expands. Then use the purple point (diamond symbol) to shade producer surplus.

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(IMPORT OR EXPORT) of clothing because the world price is(ABOVE OR BELOW) the domestic equilibrium price.

# Market for Clothing in Germany

### Graph Explanation:

This diagram represents the market for clothing in Germany, illustrating the interplay between domestic supply and demand, and its interaction with international trade through the new world price.

- **Axes:**
- The vertical axis represents the "Price of Clothing."
- The horizontal axis represents the "Quantity of Clothing."

- **Lines:**
- The **Domestic Demand** curve (blue line) slopes downward, indicating that as the price of clothing decreases, the quantity demanded increases.
- The **Domestic Supply** curve (orange line) slopes upward, showing that as the price increases, the quantity supplied increases.
- The **New World Price** is a horizontal black line, indicating a constant price level determined by international markets.

- **Surplus Areas:**
- The **Consumer Surplus**, represented by a green area marked with a triangle, shows the benefit consumers receive when they purchase a product for a price less than the maximum they are willing to pay.
- The **Producer Surplus**, illustrated by a purple area marked with a diamond, represents the benefit producers receive when they sell a product for a price higher than the minimum they are willing to accept.

This diagram helps in understanding how global pricing affects domestic markets, and how surpluses are distributed between consumers and producers when trading internationally.

Definition Video Definition Point where the demand and supply curves intersect. At the equilibrium price the quantity supplied of a good is equal to the quantity demanded. When the market is not in equilibrium, market surplus or market shortage occurs. The region that is above the price equilibrium indicates market surplus and the region below the price equilibrium indicates market shortage. Video

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