An answer to a problem of "international trade"

(1) When self-sufficient, the price of V Inter Milan is 0.8, and the output is 0.7, while the price of M Inter Milan is 1.4, and the output is 0.4.

(2) the total demand of the two countries is qwd = qdv+qdm = (1.5-p)+(1.1-0.5p) = 2.6-1.5p.

The total supply of the two countries is qws = qsv+qsm = (p-0.1)+(0.5p-0.3) =1.5p-0.4.

Let QWD=QSW, P= 1, QDV=0.5 and QSV=0.9, then the export volume of country v QSV- QDV =0.4, which is also equal to the import volume of country m.

Only two small problems were found ~ ~ ~

Country V: Consumer surplus change =-1/2 * [0.7+(0.7-1/2 * 0.4)] * (1.0-0.8) =1

-0. 12

Producer surplus change =1/2 * [0.7+(0.7+1/2 * 0.4)] * (1.0-0.8) =1

-0. 16

Net income = shadow area = 1/2 * 0.2 * 0.4 = 0.04.

Country M: Consumer surplus change =1/2 * [0.4+(0.4+1/2 * 0.4)] * (1.4-1.0) =1

0.20

Producer surplus change =-1/2 * [0.4+(0.4-1/2 * 0.4)] * (1.4-1.0) =1

-0. 12

Net income = shadow area = 1/2 * 0.4 * 0.4 = 0.08.

Total world income = net income of country V+net income of country M = 0.04+0.08 = 0. 12.