International Trade Theory and Policy
by Steven M. Suranovic

Trade 90-0

Trade 90-0


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Trade Policy Effects with Perfectly Competitive Markets

This section analyzes the price and welfare effects of trade policies under the assumption that markets are perfectly competitive.

The effects vary significantly depending on the size of a country in international markets. This distinction is made by analyzing policy effects under both "large" and "small" country assumptions.

Two different methods of analysis are common. Partial equilibrium analysis focuses on the effects in one sector only. It uses standard supply and demand curves and measures welfare using producer and consumer surplus. General equilibrium analysis incorporates the interaction of import and export sectors and the considers the effects of policies on multiple sectors in the economy. It uses offer curves to depict equilibria and measures welfare with aggregate welfare functions or trade indifference curves.

For now only the partial equilibrium analysis is available. The general equilibrium analysis will be added in the future.

International Trade Theory and Policy - Chapter 90-0: Last Updated on 6/15/97