Suppose that a country produces a product whose equilibrium price is PA. It then opens to trade, and is able to import the product at the price PW. The corresponding graph is shown below. The supply of product (S) curve and demand for product (D) curve are shown in the graph.
The trade price, PW, is the pre-trade price, and trade consumer surplus.
This country, given PW, will .
The increase in total welfare with trade is depicted by the area(s) .
The quantity of imports is .
Now assume that this country restricts this trade with a tariff of the amount T. The quantity of imports is now .
With a tariff, triangle G is .
With a tariff, rectangle H is .
With a tariff, triangle I is .
With a tariff, triangle J is .