Presentation on theme: "Chapter 8 Analysis of a Tariff. Chapter Objective To understand the effects of import tariffs on the imposing country and the world. 8.1 Introduction."— Presentation transcript:
8.6 Ways to Measure Tariff Level simple average weighted average
8.7 What Happens When a Small Country Imposes an Import Tariff?
Consumer Surplus O Y 0 Y PYPY D P0P0 Expenditure Consumer Surplus
Producer Surplus O Y 0 Y PYPY S P0P0 Costs Producer Surplus
O Y 2 Y 4 Y 0 Y 3 Y 1 Y PYPY P1P1 P0P0 P1+tP1+t H ZF E VG SW+tSW+t SWSW ab c d DdDd SdSd
Loss in Consumer Surplus: a + b + c + d a : Redistribution Effect c : Revenue Effect b : Production Effect A deadweight loss from inefficient domestic production d : Consumption Effect A deadweight loss from higher price and lower consumption volume b+d : Total deadweight losses
8.8 What Happens When a Large Country Imposes an Import Tariff?
O Y 1 Y 3 Y 2 Y 0 Y PYPY P2P2 P0P0 P1P1 S d+W +t a b c d DdDd SdSd S d+W e t
a, b, c, d The same as in the small country case. e : terms-of-trade effect Tariff revenue from the exporting country
Net Welfare effect If e>b+d, domestic welfare If e
"name": "Net Welfare effect If e>b+d, domestic welfare If eb+d, domestic welfare If e