ECON 110 1st EditionLecture 15Outline of Last Lecture I. Tax revenueII. Showing a taxa. Imposed on Buyersb. Imposed on SellersIII. Tax effectsIV. Deadweight lossOutline of Current Lecture I. Exam 2 InformationII. International Trade continueda. Summarization of previous learningb. Tariffsc. Other types of trade restrictionsd. Arguments/Counterarguments for trade restrictionsCurrent Lecture – Exam Info and International TradeExam 2 Information- Covering chapters 5-9- 45 questions - Information to knowo Demand and supply equationso Elasticity: Of price, of income, of cross price on demand side, of price on supply side Calculation Interpretation Useo Consumer/producer welfare: Consumer/Producer surplus Total surplus Deadweight losso Applications: Price Controls: ceilings and floors Taxes- Tax incidence - Tax incentive effectsThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.- Deadweight loss International trade: - Exports/imports- Effects of trade and trade protection- TariffsInternational trade continuedA shortage means a country will import a good; a surplus of that good indicates exportation.Welfare affects of trade: Pd<Pw Pd>PwDirection of trade Exports ImportsConsumer surplus Falls RisesProducer surplus Rises FallsTotal surplus Rises Rises*Trade always creates winners and losers, but the gains always exceed the losses.Market espouses: TariffsTariffs are a special form of a tax, which is levied on imported goods. The result would be that the product would domestically be priced at the world price plus the tariff, because domestic producers have no incentive to charge less. Consumer surplus falls and producer surplus rises.Other types of trade restrictionsImport quota, which raises price due to a reduction in imports, and has effects essentially the same as a tariff; fewer units will be purchased, it will increase producer welfare, and cause deadweight losses. Foreign producers may prefer quotas to tariffs, because in this case, tariff revenue goes to the foreign producer instead of the government. Arguments and counterarguments for trade restrictions1. They cause job losses: However, jobs are created in the imports market.2. They pose national security issues: If we import a strategic good, we depend on them, yet they Also depend on us to buy that good. Trade also creates friends rather than enemies.3. Infant industry argument: we should protect an industry while it's getting started. When is the point where it no longer needs protection? Protection for too long can make it dependant on that protection. 4. Unfair competition: other countries using subsidies5. Use of trade protection as a bargaining tool: This can compromise nation's credibility; be prepared to actually do
View Full Document
Unlocking...