1. Lectures in Macroeconomics- Charles W. Upton Consumers and Producers

2. Two Arguments American Workers Lose from Free Trade All of our Jobs are going overseas

3. Consumers and Producers Widget Supply and Demand S US D US PWPW In fact, some American Workers lose by some free trade measures, but the gains to consumers exceed the losses

4. Consumers and Producers Widget Supply and Demand S US D US PWPW

5. Consumers and Producers Widget Supply and Demand S US D US PWPW P US T We currently impose a tariff of T on widget imports, so that the US price is P W +T Q2Q2 Q3Q3

6. Consumers and Producers Widget Supply and Demand S US D US PWPW P US T We currently impose a tariff of T on widget imports, so that the US price is P W +T Q2Q2 Q3Q3 US demand = Q 3 ; US supply = Q 2. Imports = Q 3 -Q 2

7. Consumers and Producers Free Trade S US D US PWPW P US Q2Q2 Q3Q3 Q1Q1 Q4Q4

8. Consumers and Producers Free Trade S US D US PWPW P US Q2Q2 Q3Q3 If we permitted free trade, the US price would fall to the world price, P w Q1Q1 Q4Q4

9. Consumers and Producers Winners and Losers S US D US PWPW P US Q2Q2 Q3Q3 Consumers clearly gain from the decline in widget prices Q1Q1 Q4Q4

10. Consumers and Producers Winners and Losers S US D US PWPW P US Q2Q2 Q3Q3 Consumers clearly gain from the decline in widget prices Q1Q1 Q4Q4 And producers clearly lose from the loss in widget production

11. Consumers and Producers Winners and Losers S US D US PWPW P US Q2Q2 Q3Q3 Consumers clearly gain from the decline in widget prices Q1Q1 Q4Q4 And producers clearly lose from the loss in widget production They sell fewer widgets at a lower price

12. Consumers and Producers The Trade-Off S US D US PWPW P US Q2Q2 Q3Q3 Q1Q1 Q4Q4

13. Consumers and Producers The Trade-Off S US D US PWPW P US Q2Q2 Q3Q3 Q1Q1 Q4Q4 This seems to be the stuff of which economic arguments are made: the benefits to consumers vs. the benefits to producers

14. Consumers and Producers The Trade-Off S US D US PWPW P US Q2Q2 Q3Q3 Q1Q1 Q4Q4 This seems to be the stuff of which economic arguments are made: the benefits to consumers vs. the benefits to producers Before you get too excited there is something you should know.

15. Consumers and Producers The Trade-Off S US D US PWPW P US Q2Q2 Q3Q3 Q1Q1 Q4Q4 This seems to be the stuff of which economic arguments are made: the benefits to consumers vs. the benefits to producers Before you get too excited there is something you should know. The gains to the consumers from free trade always offset the losses to the producers!

16. Consumers and Producers The Proof S US D US PWPW P US Q2Q2 Q3Q3 Q1Q1 Q4Q4

17. Consumers and Producers Gains to Consumers S US D US PWPW P US Q2Q2 Q3Q3 Q1Q1 Q4Q4 Benefits from Additional Widgets Purchased Lower Price for Widgets Previously Purchased A B

18. Consumers and Producers The Proof S US D US PWPW P US Q2Q2 Q3Q3 Q1Q1 Q4Q4 Loss to Taxpayers from End of Tariff C D Loss to Producers

19. Consumers and Producers The Proof S US D US PWPW P US Q2Q2 Q3Q3 Q1Q1 Q4Q4 C D The gain to consumers is outlined in brown.

20. Consumers and Producers The Proof S US D US PWPW P US Q2Q2 Q3Q3 Q1Q1 Q4Q4 C D The gain to consumers is outlined in brown. It clearly exceeds the loss to producers and the government.

21. Consumers and Producers The Intuition 100,000,000 Americans consume widgets 50,000 Americans make widgets

22. Consumers and Producers The Intuition 100,000,000 Americans consume widgets 50,000 Americans make widgets When we move to free trade, –The average consumer gains $10 –The average worker loses $5,000

23. Consumers and Producers The Intuition 100,000,000 Americans consume widgets 50,000 Americans make widgets When we move to free trade, –The average consumer gains $10 –The average worker loses $5,000 Gains to American consumers: $1 Billion

24. Consumers and Producers The Intuition 100,000,000 Americans consume widgets 50,000 Americans make widgets When we move to free trade, –The average consumer gains $10 –The average worker loses $5,000 Gains to American consumers: $1 Billion Losses to American workers: $250 Million

25. Consumers and Producers The Intuition 100,000,000 Americans consume widgets 50,000 Americans make widgets When we move to free trade, –The average consumer gains $10 –The average worker loses $5,000 Gains to American consumers: $1 Billion Losses to American workers: $250 Million Query: who is more likely to protest and write their congressman? The consumer or the worker?

26. Consumers and Producers The Loss of Jobs Thanks to free trade, American widget makers shut down.

27. Consumers and Producers The Loss of Jobs Thanks to free trade, American widget makers shut down. People note all the dollars flowing to Mexico to buy widgets, and claim that “pretty soon all of our jobs will have gone to Mexico (or China or India or…)”

28. Consumers and Producers The Loss of Jobs Thanks to free trade, American widget makers shut down. People note all the dollars flowing to Mexico to buy widgets, and claim that “pretty soon all of our jobs will have gone to Mexico (or China or India or…)” But why do the Mexicans (or Indians or Chinese) want pictures of George Washington? At some point those dollars will be returned to purchase goods and services in the US

29. Consumers and Producers End ©2005 Charles W. Upton. All rights reserved