ECON1101 Lecture Notes - Lecture 8: Economic Equilibrium, Autarky, Market Power
The Domestic Price represents the equilibrium price that would occur in a country
if no international trade is allowed.
The World Price represents the equilibrium price on the international market.
A Small Open Economy is an economy that participates in international markets,
but tis production (or consumption) is small enough compared to the rest of the
world that its supply (or demand) does not affect the world price.
A Closed Economy is an economy that does not engage in international trade. Also
known as autarky.
The Gains from Trade come from larger surplus for domestic consumers (who now
buy at lower prices)
Consumers have access to wider variety of goods
Producers may be able to take advantage of economies of scale by selling to a
larger market
Domestic monopolies or oligopolies might face international competition, reducing
their market power (bookstores)
Flow of ideas and technology is faster and easier.
An Import Tariff represents a tax on imported good or services.
An Import Quota represents a quantity limit on the amount of goods or services
permitted to be imported.
Week 8 -International Trade
Saturday, 28 April 2018
7:33 pm
Document Summary
The domestic price represents the equilibrium price that would occur in a country if no international trade is allowed. The world price represents the equilibrium price on the international market. A small open economy is an economy that participates in international markets, but tis production (or consumption) is small enough compared to the rest of the world that its supply (or demand) does not affect the world price. A closed economy is an economy that does not engage in international trade. The gains from trade come from larger surplus for domestic consumers (who now buy at lower prices) Consumers have access to wider variety of goods. Producers may be able to take advantage of economies of scale by selling to a larger market. Domestic monopolies or oligopolies might face international competition, reducing their market power (bookstores) Flow of ideas and technology is faster and easier. An import tariff represents a tax on imported good or services.
