TRADE - TARIFFS+protectionistpolicies Flashcards
What is a tariff
tax on imports
anytime a tax is imposed on markets what happens to supply curve
shifts to the left /upwards
in a tariff what is the tax on
imports
why is supply curve perfectly elastic in the World Supply
?
before we impose tariff there is an x demand
what ussually would have happened and why doesnt it happen
excess
to ration it price would rise but because world suppliers have price of PW price doesnt
the eexcess d = imports
in a tariff because the tax is on imports whihc supply curve does it affect
supply of the world curve
shifting it upwards
to sw + tariff
draw tariff curve
x axis - quanitty
y axis - price
SD going upwards
DD going down
draw SW curve line - label as PW on price axis
draw q1 for domestic supply
draw q2 for domestic demand
shift sw curve upwards - note it as PW + tariff and SW + tariff
draw domestic supply now at q3 (up to sw+tariff)
draw domestic demand at q4 ( up to sw + tariff)
price = pw+ tariff
what does the distance between teh 2 supply curves represent
value of the tariff
the tax has raised the
price in the mkt to pw+ tariff
explain what happens to domestic supply as a result of the tariff
increases and extends from q1- q3
thers an extension of supply with this high pricce
as producers are incentivised to increase Q to get eh higher price
explain what happens to domestic demand as a result of the tariff
decreased and contracted from q2 to q4
as having a higher price e menas consumers are less willing and able to buy products
resulting in demand contracting up the d curve
we’ve got an extension in the x curve so we move mm
supply curve
so we move up the supply curve
why do we move up the d curve
we’ve got a contraction in D
explain the impact on imports as aresult of tariffs
excess demand remains but much s aller than before
q3-q4 much smaller than q1-q
imports have been squeexed due to tariffs because domestic demand has contracted and ds has extended
identify the tarrif revenue for hte gov to colelct and any extra info i should know
big rectangel in the middle q3-q4
its the value of tariff and charfed on every import entering the country
wjere is the deadweight loss of consuemr surplus
and explain dwl of consumer surplus
triangle to the right of tax revenue
= bit not recovered
where is the dwl of world efficiency
traingle to the right of tax revenue
explain why theres a dwl of worl efficienyc
units previosuly supplied by effieicny world suppliers w comparative advantage
now produced by suppliers who produce more due to artificial advatage
so supply less units even though less effiicient
in terms of dwl of wolrd efficicieny supply urves alos rep the
MC of production
explain the argument of world efficiency trhough tariffs through MC
UNITS after Q1 MC for SW constant
MC for DS increases after Q1 so less efiicent than suppliers at , which is true up to Q3
EVERY UNIT AFTER Q3 produced at more cost when SD producing
reosurces are provided to ineffficient producers as opposed to SW
How can we tell infnat industry benefit is present
allows them to grow as DS incfreased from Q1 -Q3
so further growth and beenfit from EOS
How can we tell the dumping problem solved
price of imports have inreased
this offsets the artificial price reduction
how can we tell domestic employment is protected
increase of SD from q1-q3 requiring increase of workers to meet new supply needs
at worst you keep same labour force
how do we protect against low labour cost advantages abroa
weve reduced imports
squeezedq3 -q4
PRICE OF IMPORTS increased
iffseting adv of low cost labout as COP increased
