L09Oct11_3060 - Lecture 9: Excess Supply & Demand...

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Lecture 9: Excess Supply & Demand Applications; Farm Retail Price Model FRE 306 Note: If you have clicker numbers 0893BD26 and 07CEB079, please re-register them on Vista.
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Application to Govt Policy: Tariff Can analyze effects of government policies like tariffs or import quotas, or domestic support policies like fixed prices Tariff in importing country (B): shifts ED curve down by amount of the tariff . World price falls, price in country B rises, traded volume declines (Fig 2-3, pg 41, McCalla/Josling; see next slide) General result is that these protection policies increase excess supply or reduce excess demand, lowering world prices Sometimes policies make the ED or ES curves less elastic , increasing the variability of world market prices Important result : world market food prices lower and more variable due to govt support policies , particularly those of developed countries. (Partic. those commods w/ most interventions) Lec 9: Excess Sy/Dd Applications; FmRetail P Spread
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Lec 9: Excess Sy/Dd Applications; FmRetail P Spread S a D a ES D b S b ED 1 P 1 Exporter Importer World Mkt Q 1 Tariff Imposed in Importer Country: World P drops from P 1 to P 2 (in export country); Price rises to P 3 in import country; P 3 - P 2 = tariff ED 2 P 2 P 2 P 3
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Application to Price Choice (private, public) Broad range of applications for countries or firms that think they have considerable market power By understanding that ROW supply considerations are
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This note was uploaded on 11/18/2011 for the course FRE 306 taught by Professor Rickbarichello during the Winter '11 term at The University of British Columbia.

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L09Oct11_3060 - Lecture 9: Excess Supply & Demand...

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