Assignment 2
NAME: HAJER BELAL GABA ALLAH
ID: BBA
SUBJECT: INTERNATIONAL ECONOMICS
LECTURE: IZANOORDINA AMIR
Q1 ANSWER :
Based on the situation above, Malaysia has put in place restrictions on exports or equivalent measures such as the compulsory
purchase by the government of available stocks. These export bans or compulsory purchases are generally temporary due to the
shortage of domestics stocks and demands. The increase in demand for surgical masks and hand sanitizers since the first confirmed
case covid-19 in the market causes an increase in demand. The decreases in supply caused the price to rise and quantity to fall. The
increase in demand caused prices to rise and quantity to rise. As we can see here, the effect on prices worked together, but the effect
of the quantity was opposed. The end result of an increase in quantity is because the demand shock was greater than the supply
shock. ​Consumer surplus refers to the monetary gain enjoyed when a purchaser buys a product for less than what they normally
would be willing to pay. In this case, consumer surplus is reduced as an increase in the price of the goods. As a result, there are
consumers who are willing to pay more than what they normally would be willing to pay but are unable to find one. Perhaps, it will
be on a first come first serve basis, but frustrated consumers will likely start to offer a higher price to stands and outbid other
consumers. This will cause the price to return to its equilibrium level. When a price rises, two things happen which are the quantity
delivered has increased (a movement along the supply curve) and the quantity demanded is decreasing (a movement along the
demand curve)On the other hand, the producer surplus is the price difference between the lowest cost to supply the market versus the
actual price consumers are willing to pay. Producer surplus is the area below the price and above the supply curve, which equals the
price minus each sellers' costs. In this case, due to high and increase of demand but decreases in supply, the effect in the market
would be the rises in prices and the inconclusive quantity. In the above situation, the total surplus does not represent the equilibrium
in the preceding circumstances. There is a deadweight to be removed. Supplier overheads are higher for producing in small quantities
against higher costs of manufacturing. Similarly, the customer receives less than what the market can provide. As a result, in order to
create a stable market, the producer(s) must raise production in order to eliminate deadweight and reach equilibrium. At the point of
equilibrium, the consumer(s) will have the greatest marginal utility, while the supplier(s) will maximize profits.
Q2 ANSWER:
• Based on the above situation, Malaysia need to continuing export durian to China because the demand for the durian
is high and the supply for the durian is also high to accommodate that demand. Therefore the market for the durian is
at equilibrium and producers and consumers are both getting what they want and need.
• The durian market equilibrium can be illustrated with the graph in Figure 1 above. The demand curve depicts how
much consumers are willing to pay for a specific amount of durians. In other words, the peak of the demand curve at
given amount indicates how much certain customers believe the durians are worth. Using the concept of consumer
surplus, we can formalize the idea of how good a bargain customers get on a transaction. The supply curve shows the
quantity that firms are willing to supply at each price. The amount that a seller is paid for a good minus the seller’s
actual cost is called producer surplus. In Figure 1, producer surplus is the area labeled “Producer Surplus” that is, the
area between the market price and the segment of the supply curve below the equilibrium. To conclude, numbers of
durians were manufactured and sold to customers. Producers and consumers both profited. The area under the
demand curve up to the equilibrium quantity equals the value of the durians. The area under the supply curve
represents the cost of producing that item. The area between the supply and demand curves, that is, the total of
producer and consumer surplus, represents the additional value generated by the transactions, i.e. the net benefit to
society. This amount is known as social surplus, which is also known as economic surplus or total surplus.In Figure
1, the region Consumer Surplus + Producer Surplus represents the social surplus (total surplus). The social surplus is
greater at the equilibrium quantity and price than at any other amount. When economists claim that market
equilibrium is (completely) allocatively efficient, they are referring to this. It is difficult to increase consumer surplus
without decreasing producer excess at the efficient level of production, and it is impossible to increase producer
surplus without decreasing consumer surplus. In other words, at the equilibrium point, the consumer and producer
profits from exchange are maximized.
Q3 ANSWER (A)
• Based on the Figure
• (A) it is shown that if domestic suppliers can offer the goods at a lower cost than the global price, they will be able to sell
their product globally at the global price.
 The balance between domestic supply and demand determines the domestic price. When a country allows trade, the price of
an item becomes the world price. The world price is determined by world supply and demand
 Domestic supply rises until it reaches equilibrium with the world price. Because the world price is greater than the
domestic price, manufacturers will continue to sell in the global market rather than the home market until the domestic price
reaches the world price, causing domestic demand to fall.
 However, the country gains since the higher price increases the producer surplus, which compensates for the loss of
consumer surplus to local customers.
 By selling on the global market, there is an additional gain in producer surplus that is not offset by a loss in consumer
surplus.
 As a result, exporting on the world market maximizes overall surplus
 When the domestic price of an export item increases to the international price, customers suffer.
 Domestic manufacturers benefit from increased prices because larger earnings result. Domestic production of the item is
increasing.
Q3 ANSWER (B)
• (B) Answer ( Based on the Figure )
• b) when domestic producers are unable to supply the product at or below the international price, the opposite occurs.
 Allowing the importation of the good or service maximises the economy's wealth in this situation.
 This raises consumer surplus at the expense of producer surplus, but there is an extra consumer surplus as a result of
more people purchasing the product due to its reduced price.
 As a result, enabling international trade benefits everyone, which is one of economics' guiding objectives.
 In conclusion, gain of consumer surplus but loss of producer surplus