INTL 2200 Lecture Notes - Lecture 7: Final Good, Free Trade, Deadweight Loss
25 Mar 2016
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Ch8 trade policy (trade management/intervention) protectionism. Tariffs: small country, price taker i) ii) Assuming tariff is specific ()/q, placed on imports (fig 1. 1) Deadweight loss, consumer gains and shit that"s like ap econ stuff. Dw loss is a loss in efficiency, dw loss is comprised of consumer loss and production loss. Right triangle is consumer loss; basically cause consumers gotta pay more etc. etc. Left triangle is from a reallocation of factors of production from one commodity to the other, but they"re producing in the more comparatively disadvantageous product so it fucks things up i guess. Pdomestic = pworld + t, pworld stays the same, fig 1. 2 shows this: large country. World supply is no longer horizontal because this country is a price maker. Pdomestic = pworld + t, but pworld drops, fig 1. 3 shows this. Fig 1. 4 shows how world price goes down because we buy less of it, due to the tariffs.
