WK8_4Oct_Ch_8_9_tariff_quota

WK8_4Oct_Ch_8_9_tariff_quota - Week 8 (Tues-Thurs.,...

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Chapter 8 Analysis of Tariffs Chapter 9 Nontariff Barriers (NTBs) Week 8 (Tues-Thurs., 10/4-6/2011)
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Outline ‘Small’ Country Case ‘Large’ Country case Chapter 9: Nontariff Barriers
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Price Sd Pd’= $330 Pd=Pw=300 Dd 0.6 0.8 1.4 1.6 Q (mill. Bikes) Effects on Well-being a c b d
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BEFORE TARIFF P Sd Dd 0.6 0.8 1.4 1.6 Q (mill. Bikes) Effects on Consumer Surplus a c b d
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AFTER TARIFF P Sd Dd 0.6 0.8 1.4 1.6 Q (mill. Bikes) Effects on Consumer Surplus a c b d
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BEFORE TARIFF P Sd Dd 0.6 0.8 1.4 1.6 Q (mill. Bikes) Effects on Producer Surplus a c b d
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AFTER TARIFF P Sd Dd 0.6 0.8 1.4 1.6 Q (mill. Bikes) Effects on Producer Surplus a c b d
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Consumer Surplus TRANSFER to Government P Sd Dd 0.6 0.8 1.4 1.6 Q (mill. Bikes) Government Revenue c
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Normative Effects of Tariff SMALL COUNTRY CASE Consumers Loss Area - (a + b + c + d) Producers Gain Area + a Govt Revenue Area + c NATIONAL LOSS Area - b -d
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Deadweight Losses Triangle d – consumption efficiency loss Consumer surplus lost Not permitted to buy at low price even if it is available Triangle b – production efficiency loss Value of domestic resources wasted in production of extra units of domestic output
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Using Data*
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Using Data* SMALL COUNTRY CASE Raises Domestic Price: $300 to $330 Expands Domestic Production: 0.6 to 0.8 mill Decreases Quantity Consumed: 1.6 to 1.4 mill Reduces imports: 1.0 to 0.6 mill Raises Tariff Revenue: ($330-$300) 0.6 mill
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With Data From Example* Consumers Loss - (a + b + c + d) a=0.6($330-$300) + ½ ($330-$300)(0.8-0.6) b= ½ ($330-$300)(0.8-0.6) c= ($330-$300) 0.6 d= ½ ($330-$300)(1.6-1.4) Producers Gain + a Govt Revenue + c NATIONAL LOSS - b -d
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Now turn to: “Large” Country In International Trade
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Price Price S S Po $40 D Po D Qo Large Country in Trade
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Additional (Positive) Effect: Setting of tariff purchases of the imported product This reduces world price of product Country benefits from paying less on remaining imports In a sense, nation forces foreign suppliers to pay the tariff Terms of Trade Gain
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Price S Price $44 S P $40 P D $34 D Qo Large Country in Trade W/ Tariff Tariff = $10
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Positive Effects of Tariff LARGE COUNTRY CASE May Raise Domestic Price of Imported Good May Expand Domestic Production May Decrease Quantity Consumed Raises Tariff Revenue ALSO HAS terms of trade effect
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P S $44 a b ca d $40 cb D Area cb = e $34 Large Country in Trade W/ Tariff Tariff = $10
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WK8_4Oct_Ch_8_9_tariff_quota - Week 8 (Tues-Thurs.,...

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