week 5 Flashcards
what are domestic price?
Represents the equilibrium price if that would occur in a country if no international trade was allowed.
what is world price?
equilibrium price on the international market.
what is a small open economy?
economy that participates in the international market, but its production is small compared to the rest of the world and thus their supply and demand does not affect the world price.
what is a closed economy?
economy which doesnt trade with the International market
another word for autarky?
closed economy
what is a import tariff?
tax on imported goods or services
who wins when traiffs are placed?
domestic producers (increase in profits) and government (tax) win
who losses when traiffs are placed?
consumers
what are quotas
A quota is a government-imposed limit in qunatity
what is the domino effect of traiff?
traif is a tax which cause the price of the import to go up, which then cause the quantity imported demanded fall, as a result the domestic firm grows.
what is the domino effect of Quota?
quota is a quantity limit, and cause the quantity limit to go down , the price of the import goes up, and then causes the quantity imported demanded fall, as a result the domestic firm grows.
