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Econ 181 Lecture 8 B
Econ 181 Lecture 8 B
Thibault FALLY
C181 – International Trade
Spring 2018
2- Tariffs in a small economy
Effect of tariffs?
Next lectures:
• Tariffs in a large economy
• Why small economies would still have tariffs?
• How to constraint large economies to reduce tariffs?
2- Tariffs in a small economy
Effect of tariffs?
NET effect = - (b+d)
= - ½ [(S2 - S1) + (D1 - D2)] . t
= - ½ (M1-M2) . t
2- Tariffs in a small economy
“Large” economy
Definition:
Effect of tariff:
• Home gains:
= e - (b + d)
• Foreign loss:
= - (e + f)