Protectionism: An Indirect Subsidy from Consumers to Producers


Assume two countries, Thailand (T) and Japan (J), have one good: cameras. The demand (d) and supply (s) for cameras in Thailand and Japan is described by the following functions:

QdT = 60 – P QsT = –5 + 14P QdJ = 80 – P QsJ = –10 + 12P

P is the price measured in a common currency used in both countries, such as the Thai Baht.

  1. Compute the equilibrium price (P) and quantities (Q) in each country without trade.
  2. Now assume that free trade occurs. The free-trade price goes to 56.36 Baht. Who exports and imports cameras and in what quantities?