4.1.4 (HL)—Trade quantity and value calculations

At the world price on a domestic supply-demand diagram, exports equal domestic quantity supplied minus domestic quantity demanded, while imports equal domestic quantity demanded minus domestic quantity supplied.

Read $Q_s$ and $Q_d$ at the same world price. If $P_w$ is above domestic equilibrium, producers supply more than consumers demand and the surplus is exported. If $P_w$ is below equilibrium, consumers demand more than producers supply and the shortage is imported.

Use $Q_{exports}=Q_s-Q_d$ only in the export case and $Q_{imports}=Q_d-Q_s$ only in the import case. Then multiply the non-negative traded quantity by the stated world price, keeping currency and quantity units consistent.

Example

At a world price of $20, domestic supply is 900 units and domestic demand is 500 units. Exports are$900-500=400$units and export revenue is$20\times400=$8,000$. If instead a lower world price of $12 gives demand of 1,000 and supply of 300, imports are 700 units and import expenditure is$12\times700=$8,400$.

These are gross trade values, not producer profit or national welfare. Do not use comparative-advantage terms-of-trade ratios when the question asks for quantities and monetary values from a market diagram.