Export Subsidy, Large Country, Exportable Product
(Figure 11.4)

The consumption effect that arises from this export subsidy is area f. Press the "Consumption Effect" button to display the consumption effect on the graph. The production effect that arises from this export subsidy is area h. Press the "Production Effect" button to display the production effect on the graph. The loss that arises due to the decline in the exporting country's international terms of trade is represented by area i + j + k + l + m in Panel A or area n + r + t + u in Panel B. Press the "Terms of Trade Effect" button to show the loss that arises due to the decline in the exporting country's international terms of trade. Press the "Net Loss to Exporting Country" button to show the net loss that arises from the imposition of the export subsidy in Panel A and in Panel B. Area n + r + t is increased surplus for the importing country. Press the "Gain for Importing Country" button to show the increase on the graph. The net loss to the world is the triangular area f + h + u. This is the loss from too much trading of steel pipes. Press the "Net Loss to the World" button to display this area on the graph.
Press "Continue" when you are ready to move on. The "Reset" button will clear the graph.