Series of lectures from Brian Butler, given during fall 2008 session at Thunderbird Global MBA, Miami campus:
This lecture 06: continue learning the basics of trade economics, by looking at the negative impacts of trade barriers (tariffs, subsidies, etc) from an economics point of view
14. Consumer Surplus: Difference between what consumers would have paid & what they actually paid for last unit. Producer Surplus: A producer willing to sell a good for $2 but receiving a price of $5 gains a producer surplus of $3 http://en.wikipedia.org/wiki/Consumer_surplus
15.
16.
17. = efficiency loss (b + d) = terms of trade gain (e) Price, P Quantity, Q P T P W P* T S D The colored triangles represent efficiency losses, while the rectangle represents a terms of trade gain. Since the US is a large country, it may be able to force the foreign suppliers to lower their prices to P* T . } d b e Imports Net Welfare Effects of a Tariff K&O, 8 th ed. p.192
18.
19.
20.
21.
22.
23. * Only if importer is large country that can influence world price and terms of trade ** quota benefit goes to foreigners who benefit from quota rents… excess profits from holding import quota licenses Price impact for importers Price Impact for exporters Impact on local consumers Impact on local producers Impact on local gov’t Net Impact country as whole Tariff Increases price Decreases* Large loss Small gain Large gain Depends on terms of trade Export subsidy Decreases price Increases Small loss Large gain Massive cost Negative always Import quota Increases price Decreases Large loss Small gain None** Depends on terms of trade