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Presentation13_1 - Introduction to microeconomics...

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Unformatted text preview: Introduction to microeconomics Wednesday, September 23, 2009 Lectures will cover only pages 205-217. The focus will be on the effects of imports, exports, tariffs and quotas on consumer and producer surpluses. In particular, in how tariffs and import quotas cause inefficiency and reduce total surplus Early part of Chapter 8 repeats material covered in first few days of the semester only applying model to inter-country trade rather than between two individuals. (b) Imports and Exports for Different Countries, 2005 Belgium China 90% 80 70 60 50 40 30 20 10 Percent of GDP 2000 2006 1960 1970 1980 (a) U.S. Imports and Exports 1960-2006 1990 Year 18% 16 14 12 10 8 6 4 2 Percent of GDP Imports Exports Mexico France Germany Canada U.S. The main sources of comparative advantage are: International differences in climate e.g. winter deliveries of Chilean grapes to the U.S. Differences in technology Factor endowments The domestic demand curve shows how the quantity of a good demanded by domestic consumers depends on the price of that good. The domestic supply curve shows how the quantity of a good supplied by domestic producers depends on the price of that good. The world price of a good is the price at which that good can be bought or sold abroad. If the world price is higher than the autarky price, trade leads to exports and a rise in the domestic price compared to the world price. There are overall gains from trade because producer gains exceed the consumer losses. Price of computer Q A Quantity of computers A P A P W Autarky price World price Exports Domestic quantity demanded with trade Domestic quantity supplied with trade Q D Q S Domestic supply Domestic demand Q A A P A P W Exports W X Y Z Q D Q S Price of comput er Quantity of computers Domesti c supply Domestic demand X X +Z + Z Gain Loss Changes in surplus Consumer surplus Producer surplus Change in total surplus...
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This note was uploaded on 12/07/2009 for the course ECON 211 taught by Professor Na during the Fall '08 term at Rice.

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Presentation13_1 - Introduction to microeconomics...

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