ECON 2304 Lecture Notes - Lecture 14: French Wine, Deadweight Loss, Underconsumption
19 Oct 2016
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Whether a good is imported is exported, trade creates winner and losers. Recall one of the ten principles from chapter 1: The winners from trade could compensate the losers and still be better off. Hence, the losers have more incentive to organize and lobby for restrictions on trade. Consumers must pay for an imported shirt. In general, the price facing domestic buyers & sellers equals (pw + t) Free trade: buyer"s demand __80__ sellers supply _25___ imports = __55__ T = /shirt price rises to buyer"s demand _70_ sellers supply _40_ imports = _30_ Cs = a + b + c + d + e + f. Ts= a + b + c + d + e + f + g. Ts = a + b + c + e + g. Import quota: a quantitative limit on imports of a good. Mostly has the same effects as a tariff: A tariff creates revenue for the govt.
