trade creation Flashcards
1
Q
what is trade creation
A
-theory that derives form membership of customs union
-movement from a high cost domestic producer to a low cost producer in customs union
2
Q
trade creation diagram
A
before:
-y-axis price, x-axis quantity
-puk and puk and tariff
-s + tariff above normal s
-qi and q2 where tariff
then:
-q3 before
-q4 after
-gain of CS between q2 and q4
-gain of world efficiency between q3 and q1
-willing to demand more imports
3
Q
benefits of trade creation
A
-benefits of free trade and other advantages of customs union
