GWLecture8

GWLecture8 - Part IIa: Paper 1 General Equilibrium and...

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Unformatted text preview: Part IIa: Paper 1 General Equilibrium and Welfare Economics Dr Sönje Reiche 2 Outline • Analysis of Import Tariffs • Observed Patterns of Trade • Economies of Scale (K&O, Ch. 6) – Internal Economies – External Economies • Infant Industry Protection (K&O, Ch. 10) • Strategic Trade Policy (K&O, Ch. 11) • Factor Mobility (K&O, Ch. 7) 3 General Equilibrium Effect of Tariffs x y y x p p- y x p p MRS = d x d y y x p p MRT = s y s x Import E x p o r t 4 x y y x p p- d x d y s y s x Impose a tariff on good x (Tax revenue is given back to consumers) y x p t p +- d t x s t x d t y s t y Losers • Consumers • Producers of y Winners • Producers of x 5 Tariffs in a Large Country Terms of trade = price import price export Possible to affect world prices by imposing tariffs Effect of a tariff: reduces imports from ROW, creating excess supply in ROW, drives prices of imports down improves terms of trade 6 x p S D ROW p Imports A C D ROW p ' t p p ROW D + = ' B Producer gain: A Revenue gain: B+E Consumer loss: A+B+C+D E Net loss: C + D - E Terms of trade gain 7 Common Agricultural Policy S x p D AUT p ROW p D p t • guarantee high prices: excess supply XS • excess sold as subsidised exports • driving world price down 8...
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This note was uploaded on 03/07/2012 for the course ECON 201 taught by Professor Cowell during the Spring '10 term at LSE.

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GWLecture8 - Part IIa: Paper 1 General Equilibrium and...

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