ECON 10a Lecture Notes - Lecture 9: Economic Equilibrium, Economic Surplus, Deadweight Loss

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turquoisecrocodile278

5 Nov 2016

School

Brandeis University

Department

Economics

Course

ECON 10a

Professor

Coiner Harry( Michael)

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Document Summary

A world price higher than the domestic price will incentivize domestic producers to export. A world price lower than the domestic price will incentivize consumers to import: while the domestic supply and the domestic demand does not change, the. If the world price is lower than , ricardo will import bikes. If there are no transport costs, the final price in ricardo will drop to . Imports is the difference between quantity bought and quantity produced at home. Effects of the tariff: in an effort to protect ailing domestic industries governments may enact tariffs, a tariff is a tax on foreign producers, usually used to raise revenue in a nation. Tariffs increase world price by a set amount, which changes the quantity demanded and the quantity supplied. Imports decrease to new equilibrium demanded negative new equilibrium supplied. Two new inefficiencies are created due to the tariff.

Related Questions

The demand for computers in a certain country is given by D = 20000 â 300P; where P is the price of a computer. Supply by domestic computers producers is S = 10000 + 100P.

(a) Assuming that the economy is closed, find the equilibrium price and production quantity of computers.

(b) The economy opens to trade. The world price of a computer is $20. Find the domestic quantities demanded and supplied and the quantity of imports or exports. Who will support the opening of the computer market to trade and who will oppose it?

(c) The government imposes a tariff of $1 per computer. Find the effects on domestic quantities demanded and supplied and on the quantity of imports or exports. Also find the tariff revenue collected by government. Who will support the imposition of tariff and who will oppose it?

(d) Suppose the government imposes an import quota of 1600 computers. Find the equilibrium price in the domestic computer market, as well as the quantities produced by domestic firms and purchased by domestic consumers.

1. If we know that Canada exports maple syrup, we can conclude that maple syrup consumers in Canada are worse off than they would be in the absence of trade.

Is the statement true or false?

2. When a country opens up to trade in a good for which it has a comparative advantage, and the country begins to export the good, we can conclude that:

	a.	The domestic price will fall after trade opens up.
	b.	The total surplus for this good will increase as a result of opening up the market to international trade.
	c.	Opening the market to international trade will create a deadweight loss.
	d.	Both buyers and sellers in that country will be better off as a consequence of opening up the market to international trade.

cyanturtle416

Costa Rica is a small country and assumed to be unable to affect world prices. It imports blueberries at a price of 10 dollars per box.

The domestic supply and domestic demand curves for boxes are: S = 60 + 20P D = 1160 - 15P

a) Assume Costa Rica is completely open to trade. What are the equilibrium price and quantity consumed? How much is produced domestically, and how much is imported?

b) Now consider the effect of an import quota of 400 boxes. What happens to the price of Blueberries and the quantity consumed?

c) Who wins and who loses? Discuss consumers, domestic producers, and importers (be sure to compute the change in their welfare).

rosedolphin426

ECON 10a Lecture Notes - Lecture 9: Economic Equilibrium, Economic Surplus, Deadweight Loss

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