gs_-13_--_Markets_and_Economic_Welfare

gs_-13_--_Markets_and_Economic_Welfare - SOME ANNOUNCEMENTS...

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1 1/08/2010 1 SOME ANNOUNCEMENTS IN UVLE: “THREE MEMOS FROM GPS” ± #1: Notes POVERTY REDUCTION in some large countries: CHINA, INDIA, BRAZIL, ETC. ± #2: SCROOGENOMICS: Valuation of gifts between GIVERS and RECEIVERS ± #3: CLIMATE CHANGE AND COPENHAGEN 1/08/2010 2 Lecture 13: WELFARE AND MARKETS ± SUMMARIZE WELFARE EFFECTS: EXPORTS, IMPORTS, IMPORT TARIFFS ± SOCIAL DISORDER, CORRUPTION AND WELFARE ± REVIEW: SUMMARY OF MARKETS AT THIS POINT ± MARKET FAILURE: Introduction 1/08/2010 3 0 Price Quantity Demand schedule Supply schedule GAINS FROM EXPORTS CS PS P 0 Q 0 LOSS OF CS IS OFFSET BY THE GAIN OF PS PLUS AN ADDITIONAL NET GAIN OF PS. P W P W Q D Q D+X NET GAIN OF SOCIETY
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2 1/08/2010 4 NET GAIN OF SOCIETY 0 Price Quantity Demand schedule Supply schedule GAINS FROM IMPORTS CS PS P 0 Q 0 A NET GAIN OF ADDITIONAL SURPLUS IS EARNED BY CONSUMERS OVER AND ABOVE THAT LOST BY PRODUCERS. P W P W Q D Q D+M TOTAL IMPORTS 1/08/2010 5 Analysis of the effects of an import tax designed to raise tax revenues – the revenue tariff 1/08/2010 6 0 Price Quantity Demand schedule Supply schedule IMPORTS WITHOUT A TARIFF CS PS P 0 Q 0 TOTAL IMPORTS BEFORE TARIFF P W P W Q D+M Q D
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3 1/08/2010 7 0 Price Quantity Demand schedule Supply schedule A REVENUE TARIFF CS PS P 0 Q 0 TOTAL IMPORTS BEFORE TARIFF P W P W Q D+M Q D P W +T P W + TARIFF Tariff per unit 1/08/2010 8 0 Price Quantity Demand schedule Supply w/o trade A REVENUE TARIFF CS PS P 0 Q 0 P W P W TOTAL IMPORTS AFTER TARIFF P W +T P W + TARIFF Q D Q D+M Producer surplus (benefit) from protection Gov’t tariff revenue = Tariff x Imports Deadweight loss: Two areas added 1/08/2010 9 SUMMARY OUTCOME: REVENUE TARIFF ± There is a loss of consumer surplus because of price increase due to the revenue tariff.
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gs_-13_--_Markets_and_Economic_Welfare - SOME ANNOUNCEMENTS...

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