Question

Consider a country that imports a good from abroad. For the following statement, state whether it is true or false. Explain your answer.

“if domestic supply is perfectly inelastic, consumers do not benefit from trade.”

Answer 1

if domestic supply is perfectly inelastic, consumers do not benefit from trade.

False,

IF the supply is perfectly inelastic ( it means the domestic supply will not change with increase or decrease of prices) but from trade allowed the consumers can buy the good at low prices ( at world price), it means consumer will pay lower price also they can now buy more quantity which is not possible if trade is not allowed ( as supply is perfectly inelastic). So overall the consumer surplus rises and consumers will benefit from trade.

That's why the statement is false.