Export Subsidy

[@MIbtehajKhan]

Ma'am, you have nailed it, struggling to understand EXPORT SUBSIDY from the past 1 hour and now completely get it in under 6 mins. Thanks and huge respect.

[@IrisFranz]

Glad to help. Happy learning!😃

[@Jani329r]

Usually I never write comments but this time I have to make an exception. Thank you so much for this explanation! Please keep making videos. So much input in only 5 mins! Completely understood everything. Very well explained!

[@IrisFranz]

Thanks for your kind words!

[@youdontknowme5535]

Thank you thank you thank you 🥰 explanation was clear and perfect

[@IrisFranz]

Glad that it was helpful!

[@melisaacar9221]

You are a great Prof! Thank you so much for the clean and brief explanation

[@IrisFranz]

Glad it was helpful!

[@Icecream-dv8oz]

Great explanation very clear, thank you !

[@thiofanty1636]

THANKYOU!!! KEEEP POSTING VIDS

[@IrisFranz]

You’re welcome!

[@shafiqhussain5706]

excellent madam. shafiq kpk pakistan

[@IrisFranz]

shafiq talha glad to help. Happy learning.

[@rexwong2850]

Thanks for the video. Would consumers buy at price Pw for foreign goods from international market instead of paying Pw+T for domestic goods?

[@rexwong2850]

Thank you for the reply. Is there a diagram showing export subsidy only without showing the tariff together on the same diagram?

[@IrisFranz]

Sorry I misunderstood your question. No, domestic consumers are unable to get the price Pw in the international market because the sellers are able to segregate the domestic and international market.

[@rexwong2850]

@@IrisFranz thank you, it is a nice explanation

[@astitchintime5654]

U explained very well.. M nt getting one thing, in tariff case for small country where u wrote quantities supplied w quantities demanded... How come we knw.? 🤔

[@IrisFranz]

Given the price, look at the corresponding point on the demand/supply curves. The curves will tell you the quantity demanded and supplied given the price. Best luck!

[@sharanyakannan3799]

This helped a lot. Thanks!

[@IrisFranz]

You’re welcome!

[@chiraggoswami7270]

i have to say, i have never liked economics... if only we had teachers like you

[@IrisFranz]

Thanks!

[@sajidnoor9482]

I do have a question and doubt that domestic consumer price will increase. Because the world price is Pw. If domestic producer sell at Pw +t (in your graph), then consumers will import from the world at Pw Price. So domestic producer will export all their production to the world market (Qs2) and domestic consumers will import Qd1 at the price Pw from the world market. In an open economy, there is no restriction on Imports if the domestic price is higher than the world price. Many other countries will be willing to export the good at Pw price. For example, suppose the oil price in the world market is $100 per barrel. The US government will give a $5 subsidy on each unit of export. So the US oil producer will get $105 for every barrel they export in the world. US producers get $100 from the world market and $5 from the government. If US domestic oil producer wants to sell at $105 in the domestic market, then foreign oil producers like Saudi Arabia will export to the US at $100. So domestic consumers will consume entirely Saudi oil at $100 and purchase none of the US producer oil. On the other hand, US producer will export their entire production in the world since they can make $105 per barrel. Please explain if I am wrong and why I am wrong?

[@IrisFranz]

I like your critical thinking! Keep in mind that export subsidy might not be limited to cash, but also lower-than-market-rate loan and other tax breaks. In any case, export subsidy raises the *opportunity cost* to sell the product domestically (you must export to obtain the benefits from the government), and thus, lower the quantity supplied domestically. In addition, remember that we ignore import tariff and transportation cost for simplicity. In reality, transportation cost and tariffs for imports will make it too costly to import the same goods from abroad. Bottom line: domestic price will rise more or less. Best luck!

[@the_growth_mindset.]

Is this for a small or large country? Great Video btw!

[@IrisFranz]

When the country’s government provides a subsidy, it doesn’t change the world price. So you can see the country is small.

[@the_growth_mindset.]

@@IrisFranz Thank you

[@duzarek]

this was soo clear than youuu

[@okayfine483]

i LOVE YOU U SAVED ME

[@IrisFranz]

Glad that it was helpful!