MGCR 382 Lecture Notes - Lecture 16: Cultural Exception, Doha Development Round, Ex-Gay Movement
6 Sep 2016
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Mgcr382 - lecture 16 - trade policy part 2 tutorial 2-5 pm bronf 151. Conclusion from last class: no trade = 2 different prices that are independent. 2. free trade = 1 price everywhere a. that is an extreme conclusion because it doesn"t take into account product differentiation, quality, customer preference. Restricted trade quantity of trade should go down because foreign countries do not want to export there, the price is going to up. The price in home increases to a new price because of the additional tariff: pt. Pt is higher than the price without tariff pw. But the price does not generally increase by the tariff amount t. In the home market, suppliers are going to like it because they can sell for a higher price and consumers are not going to like it because the prices are higher. The quantity traded falls from qw to qt. Because at this higher price, consumers in home demand fewer imports.
