The last group to look at is the government. The government is not affected either way with a quota.
The government will gain by establishing a tariff. The government will receive additional money with a tariff. In this case, the revenue they receive will be the size of the tariff which is the difference between Pt and Pw multiplied by the amount of goods that are imported. This is represented by the difference Qt and Qtd. The tax revenue for the government is represented by the shaded area.
With the use of supply and demand graphs, it is easy to see the winners and losers in an open and a closed economy.
- In a closed economy, consumers will pay the most and have the least quantity. Domestic suppliers will most money and have the most quantity.
- In a completely open economy, consumers will play the least while domestic producers will lose the most.
