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When the number of farmers growing wheat in Russia increases, the increase in world supply lowers the world price of wheat.
Draw an appropriate diagram to analyze how this change in the world price affects consumer surplus, producer surplus, and total surplus in a nation that imports wheat, such as Japan. Label (i) the old and new world prices, (ii) the change in quantity demanded by consumers, and (iii) the change in quantity supplied by domestic producers. Make a table that shows consumer surplus, producer surplus, and total surplus at the old world price and new world price.
Now draw an appropriate diagram to show how this change in price affects consumer surplus, producer surplus, and total surplus in a nation that exports wheat such as the United States. Label (i), (ii), and (iii) as above, and make a similar table.
Compare your answers from (a.) and (b.). Which country should be concerned about the increase in Russian wheat production? Which country should be applauding it?
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