Supply and Demand Effects of Tariffs

… a core concept in Economic Analysis and Atlas102

Click for MRU video

Click for MRU video

Concept description

Alex Tabarrok (reference below, video on right) describes how protectionist measures such as tariffs and quotas affect supply and demand.

Tabarrok compares the domestic supply and demand in  situation with Free Trade with that of a situation of no international trade.

The Imports will be the quantity supplied with free trade minus the quantity supplied with no international trade as illustrated below.

AnalyzingTrade

Tabarrok then shows the effect of a Tariff. A tariff (a tax on imports) reduces both domestic supply and demand, and results in a quantity of government revenue.

EffectOfTariffsPractice questions

From http://www.mruniversity.com/node/201843, accessed 5 May 2016.

  1. The Japanese people currently pay about four times the world price for rice because of trade barriers. Who is more likely to make a greater effort lobbying for or against a reduction in trade barriers?

Atlas topic, subject, and course

Trade (core topic) in Economic Analysis and Atlas102 Economic Analysis.

Source

Alex Tabarrok, Another Look at Comparative Advantage (12-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/comparative-advantage-definition-opportunity-cost, accessed 5 May 2016.

Alex Tabarrok, Comparative Advantage Homework (12-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/comparative-advantage-trade-homework, accessed 5 May 2016.

Page created by: Ian Clark, last modified 5 May 2016.

Image: Alex Tabarrok, minute 0.14 of Another Look at Comparative Advantage (12-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/comparative-advantage-definition-opportunity-cost, accessed 5 May 2016.