EC 201 9-17-08 - w tariff • Tariff ↑P Q adjusts to an...

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EC 201 9-17-08 Market for internationally traded good Producers in importing country push for restrictions on imports Tariff: tax on imports So far, P buyers = P sellers with tariff, P buyers > P sellers Tariff (or any tax)- drives a wedge between buyers prices and sellers price Supply and Demand representation of tax: old, net-of-tariff S curve _relevant for sellers New, gross-of-tariff S curve _ relevant for buyers Tariff per unit=vertical distance between S gross & S net Tariff revenue for govt. of importing country = (tariff per unit)(# units)- Q
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Unformatted text preview: w tariff • Tariff : ↑P + Q adjusts to an extent determined by shape of D curve • Another interference: import quota- direct restriction on Q of imports • Ex. : US has quotas on sugar imports • Winners –tariff and quota – producers in importing country – tariff- govt. of imp. Country (tariff revenue) quota- holder of import license • Losers- consumer in importing country- exporters – exporters may pressure for retaliation •...
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