ECON 1000 Lecture Notes - Lecture 13: Economic Surplus
8 May 2017
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Econ 1000 week 7 lecture 13. If the world price is higher than domestic prices, generally they would also raise to world price. This price raise does two things, theres a movement on demand curve, and they consume less because price is higher, but the movement on supply curve is farther to the right which means more are produced. There"s not really a surplus in produce because it gets exported. Consumer surplus would decrease while the producer surplus would increase. The gain in producer surplus is larger than the loss in consumer surplus. Imports are good and exports are a necessary evil. When we trade usually everything is cheaper abroad. Free trade can also lead to unemployment. You can create an autarky by raising a tariff on imports high enough to give incentive for that behavior. By reducing imports we can push the price down, which is similar to making foreigners pay taxes because we raise prices.
