ECON 102 1st Edition Lecture 11 Outline of Last Lecture 1 International Trade a Globalization b Comparative Advantage c Supply Demand and International Trade Outline of Current Lecture I Measuring Gains Losses from trade II Free Trade a Trade Protection Measures Current Lecture Measuring gains and losses from trade Consumer Surplus C S Measures the net gain of a consumer from the purchase of a good o Bounded by the equilibrium price and the demand price o D 4 P P 4 D o C S base x height Producer Surplus P S Measures the net gain of the supplier from selling a good o Supply Curve S P start at 0 the origin o P S base x height EX Let P 1 What happens to C S and P S C S D 4 P P 4 D 1 4 D D 3 P S S P S 1 RESULT As P decreases C S increases and P S decreases If imports added P decreases C S increases and P S decreases Qd Qs Quantity Demand Quantity Supply now called Imports Free Trade These 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 An economy is in free trade when exports and imports are the result of demand and supply Markets are free of government intervention However governments use taxes and other restrictions to limit imports Policies are known as trade protection or just protection Trade Protection Measures 1 Tarif A tax levied on import goods o Raises both the price received by domestic producers and the price paid by domestic consumers 2 Import Quota A legal limit on a quantity of a good that can be imported o Import quotas are usually administered through licenses a number of licenses are issued each giving the license holder the right to import a limited quantity of the good each year
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