Global Wheat Glut
The question
The small country of Ostvale imports wheat at the going international market price, which is below the price that would clear the Ostvale market with no trade. A record growing season across the major wheat-exporting nations leaves the world crop far larger than usual, while Ostvale's own harvest is normal. Show the effect of this change on the market for wheat in Ostvale, assuming all else is held constant. Show the effect on the International Trade graph.
Equilibrium at Quantity 64, Price ($) 49
Drag a curve, or use the arrow buttons. Want the free-play version with every control? Open this graph in the sandbox.
Global Wheat Glut: the worked answer
On the International Trade graph, The world price (Pw) shifts down.
Why The world price (Pw) shifts down
A bumper harvest abroad adds to world supply, and Ostvale is far too small to influence what wheat trades for, so it simply faces a cheaper world market: the world price line moves down. Ostvale's own growing conditions, input costs, household incomes, and tastes are all untouched, so neither the domestic supply curve nor the domestic demand curve moves.
What happens to the equilibrium
At the lower world price domestic quantity demanded rises and domestic quantity supplied falls, so imports widen. Consumer surplus in Ostvale increases and producer surplus falls, and because consumers gain more than producers lose, total surplus in Ostvale rises.
The mistake students make on this one
Students often shift domestic supply to the right, since the extra wheat is real enough. The harvest happened in other countries, so it changes the price Ostvale faces rather than what Ostvale's own farmers can grow at each price. Domestic farmers slide down their unchanged supply curve, and the only thing that moves is the world price line, which moves down.
On exam day
On a small-country trade graph, foreign events move the horizontal world price line while domestic events move the sloped curves. Imports are the horizontal gap between the two domestic curves measured at that price line, so a lower line always means wider imports.
How this is graded
The checker reads every curve's position before and after your answer. You are marked correct only when The world price (Pw) shifts down and every other curve on the International Trade graph stays where it started — the same standard an AP reader applies to a drawn graph: the right shift, and nothing extra. There is no AI involved; the rubric is the geometry.
More International Trade scenarios
Keep score across all 127 scenarios
Everything here stays free without an account. Signing up just saves which scenarios you have solved, and tracks your progress through both courses.
Create a free accountLast updated