9-27 lecture notes

9-27 lecture notes - with trade because everyone gets more...

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Effect of trade on well-being of society CS before trade was E, after the trade it is EBCD PS before trade was AB, after trade it is A Therefore, total is positive CD The initial industry may struggle but this allows for specialization and eventually the labor force will train itself to work in the stronger industries and the society as a whole is better-off Trade adjustment assistance is the concept that some people may have a hard time retraining themselves but the society collectively provides them some facility, “you are hurt, here is some money, go and train yourself” This has to happen whether the society trades or not, but is easier to accomplish
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Unformatted text preview: with trade because everyone gets more opportunity • Effects of tariffs o International price rises from 25 to 35 dollars o Domestic price was equilibrium at 50 dollars o Domestic producers now are able to provide more than at 25 dollars and international producers supply less o Imports therefore are restricted o CS before tariff was BCDEFGHIJ and after tariff it is GHIJ so negative BCDEF o PS before tariff was A and after tariff is AB so gain B o Gov before tariff got no revenue and after tariff gain DE, so gain DE o Therefore, CF is lost forever and tariffs are bad...
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