The document discusses the market for wall board in Canada. It describes how the market was initially in equilibrium with domestic production at a certain price. When US exporters offered wall board at a lower international price, imports increased which decreased domestic production and employment. In response, domestic producers lobbied for a tariff to be imposed on imports. The tariff increased imports' price and reduced imports. This allowed domestic production and employment to increase but also reduced consumer surplus through higher wall board prices.

1. Price of
Wall Board
Quantity of Wall Board
S*
D*
“A”
Q e
P (Domestic)
Market for Wall Board
(Canada)
The Market for Wall Board is in some relative equilibrium
at a Price of “P (Domestic)” and Market Quantity “Qe” at Point “A”

2. Price of
Wall Board
Quantity of Wall Board
S*
D*
“A”
Q e
P (Domestic)
P (International)
Market for Wall Board
(Canada)
US Exporters of Wall Board are willing and able to sell
Wall Board in Canada for a much lower price.
Call this Price “P (International)”

3. Price of
Wall Board
Quantity of Wall Board
S*
D*
“A”
Q e
P (Domestic)
P (International)
“B”
Q D
Market for Wall Board
(Canada)
At “P (International)” the DOMESTIC Quantity Demanded in
Canada is “QD” at Point “B”.

4. Price of
Wall Board
Quantity of Wall Board
Market for Wall Board
(Canada)
S*
D*
“A”
Q e
P (Domestic)
P (International)
“B”“C”
Q D
Domestic
Production
Q S
Domestic
However, at “P (International)” the DOMESTIC
Quantity Supplied (“Domestic Production”)
is now “Q S” at Point “C”.
“C”

5. Price of
Wall Board
Quantity of Wall Board
Market for Wall Board
(Canada)
S*
D*
“A”
Q e
P (Domestic)
P (International)
“B”“C”
Q D
“IMPORTS”Domestic
Production
Q S
Domestic
“C”
The Difference between Quantity Demanded “Q D”
and Domestic Quantity Supplied “Q S Domestic”
is made up with IMPORTS of Wall Board from the US.

6. Price of
Wall Board
Quantity of Wall Board
Market for Wall Board
(Canada)
S*
D*
“A”
Q e
P (Domestic)
P (International)
“B”“C”
Q D
Domestic
Production
Q S
Domestic
L
Lost Domestic
Production
Key Point: As a result of the increase in Imports from the US
at a lower price, Domestic Producers decrease production
by the difference between “Qe” and “Q S Domestic”(which they now supply)
denoted by “LOST DOMESTC PRODUCTION”
This will not make Canadian producers and their employees happy.
What can they do?
“IMPORTS”

7. Price of
Wall Board
Quantity of Wall Board
Market for Wall Board
(Canada)
S*
D*
“A”
Q e
P (Domestic)
P (International)
“B”“C”
Q D
P International
Plus Tariff
Q D1
Domestic
Production
Q S
Domestic
Lost Domestic
ProductionLost Domestic
Production
L
Lost Domestic
Production
They can lobby for a TARIFF to be levied on the Imports.
The Tariff will increase the price of the Imported Wall Board by
some amount greater than the Import price “P (International)”
Let’s call the new price “P International Plus Tariff”
“IMPORTS”

8. Price of
Wall Board
Quantity of Wall Board
Market for Wall Board
(Canada)
S*
D*
“A”
Q e
P (Domestic)
P (International)
“B”“C”
Q D
“D”
P International
Plus Tariff
Q D1
Domestic
Production
Q S
Domestic
Lost Domestic
ProductionLost Domestic
Production
L
Lost Domestic
Production
At “P International Plus Tariff” the Quantity Demanded
Is now “Q D1” at Point “D”
“IMPORTS”

9. Price of
Wall Board
Quantity of Wall Board
Market for Wall Board
(Canada)
S*
D*
“A”
Q e
P (Domestic)
P (International)
“B”“C”
Q D
“D”
Q D1
“E”
Domestic
Production
P International
Plus Tariff
Q S
Domestic
Q s1
Domestic
At “P International Plus Tariff” the Quantity Supplied
Is now “Q S 1” at Point “E”.
NOTE: Look at happens to “Lost Domestic Production”
In the next slide.
“IMPORTS”

10. Price of
Wall Board
Quantity of Wall Board
Market for Wall Board
(Canada)
S*
D*
“A”
Q e
P (Domestic)
P (International)
“B”“C”
Q D
“D”
Q D1
“E”
Domestic
Production
P International
Plus Tariff
Q S
Domestic
Q s1
Domestic
L
Lost Domestic
Production
Lost Domestic
Production
Lost Domestic Production gets smaller as
Domestic Production
INCREASES in response to the higher price.
“IMPORTS”

11. Price of
Wall Board
Quantity of Wall Board
Market for Wall Board
(Canada)
S*
D*
“A”
Q e
P (Domestic)
P (International)
“B”“C”
Q D
“D”
Q D1Q s1
Domestic
“E”
Domestic
Production
“IMPORTS”
P International
Plus Tariff
Q S
Domestic
L
Lost Domestic
Production
“IMPORTS”
Notice what happened to IMPORTS of Wall Board.
Imports are now the difference between “Q D1” and
Q S1”. LESS than they were before the Tariff.

12. Price of
Wall Board
Quantity of Wall Board
Market for Wall Board
(Canada)
S*
D*
“A”
Q e
P (Domestic)
P (International)
“B”“C”
Q D
“D”
Q D1Q s1
Domestic
“E”
Domestic
Production
Domestic
Production w/Tariff “IMPORTS”
P International
Plus Tariff
Q S
Domestic
“IMPORTS”
KEY POINT: With the Tariff Domestic Producers
produce more of Wall Board than without BUT still
less than when there were no imports of Wall Board.
Good for them!
However, the Tariff prevents consumers and homebuilders
from purchasing Wall Board at a lower price.
Bad for them!

13. Price of
Wall Board
Quantity of Wall Board
Market for Wall Board
(Canada)
S*
D*
“A”
Q e
P (Domestic)
P (International)
“B”
Q S
“C”
Q D
“D”
P International
Plus Tariff
Q D1
“E”
Q s1
Domestic

14. Price of
Wall Board
Quantity of Wall Board
Market for Wall Board
(Canada)
S*
D*
“A”
Q e
P (Domestic)
P (International)
“B”
Q S
“C”
Q D
“D”
P International
Plus Tariff
Q D1
“E”
Q s1
Domestic
“DWL”

15. Price of
Wall Board
Quantity of Wall Board
Market for Wall Board
(Canada)
S*
D*
“A”
Q e
P (Domestic)
P (International)
“B”
Q S
“C”
Q D
“D”
P International
Plus Tariff
Q D1
“E”
Q s1
Domestic
“DWL”“DWL”

16. Price of
Wall Board
Quantity of Wall Board
Market for Wall Board
(Canada)
S*
D*
“A”
Q e
P (Domestic)
P (International)
“B”
Q S
“C”
Q D
“D”
P International
Plus Tariff
Q D1
“E”
Q s1
Domestic
“DWL”“DWL”
Tax
Revenue

17. Price of
Wall Board
Quantity of Wall Board
Market for Wall Board
(Canada)
S*
D*
“A”
Q e
P (Domestic)
P (International)
“B”
Q S
“C”
Q D
“D”
P International
Plus Tariff
Q D1
“E”
Q s1
Domestic