ECON 2001.01 Lecture Notes - Lecture 12: Voluntary Export Restraints
28 Sep 2018
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Document Summary
The consumption and production in a country is smaller than the global trade. Domestic producers and consumers receive and pay the world price. When the world price is below the domestic price, the shortage is made up with imports. (buser 5) Two results: more goods will be exchanged in the world as a whole, and competition makes the price to be the same as the world price. Another notice: even imports a foreign good, the domestic production is still there / there will be complete specialization. Result within the country: gains of the winner outweigh the lost of the losers, there"s gonna be an overall gain. Welfare effects of trade: caused a transfer of surplus from consumer to producer, but gains as a whole. Imports make consumers happy, exports make producers happy (buser 11) A policy aimed to decrease the competition from foreign products. Tariffs (raises the price hence limits the imports)
