Theory_of_Trade_Policy__Lesson_31--rewri - Import Demand...

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1 Lesson 32 1 Import Demand and Export Supply We have shown that trade benefits an economy in the aggregate, but likely harms some individual groups within the economy Virtually all countries limit trade using a variety of policy options In this lesson, we develop the basic tools for analyzing the effects of trade limitations Lesson 32 2 Policy analysis can be done in a partial- equilibrium framework i.e., we need only model an individual market without explicitly considering the general-equilibrium effects Our main tool of analysis then starts with ordinary demand and supply Lesson 32 3 Consider the market for a single good (e.g., blank t-shirts) Assume this market is perfectly competitive and that all t-shirts are alike Draw the ordinary demand and supply for t-shirts in the U.S. economy
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2 Lesson 32 4 The U.S. t-shirt Market 4 P .. US D S Q 12 Lesson 32 5 What if it were possible to buy shirts from another country at a price lower than the U.S. autarky price? e.g., suppose Americans could buy as many t-shirts as desired from Malaysia at a price of $3 each? How many shirts would the U.S. import at this price? Lesson 32 6 We have assumed that all t-shirts are alike and that the market is perfectly competitive If Americans can import Malaysian t-shirts at $3 each, they would be unwilling to pay
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Theory_of_Trade_Policy__Lesson_31--rewri - Import Demand...

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