...Using Supply and Demand 5 A f t e r r e a d i n g t h i s c h a p t e r, y o u s h o u l d b e a b l e t o : Show the effect of a shift in demand and supply on equilibrium price and quantity. Explain real-world events using supply and demand. Demonstrate the effect of a price ceiling and a price floor on a market. Explain the effect of taxes, tariffs, and quotas on equilibrium price and quantity. State the limitations of demand and supply analysis. State six roles of government. It is by invisible hands that we are bent and tortured worst. Nietzsche I n the last chapter we introduced you to the concepts of supply and demand. In this chapter we will (1) show you the power of supply and demand, (2) show you how the invisible hand interacts with social and political forces to change the outcome of supply and demand analysis; and (3) discuss how one must adjust supply and demand analysis with other issues kept at the back of one’s mind. THE POWER OF SUPPLY AND DEMAND To ensure that you understand the supply and demand graphs throughout the book, and can apply them, let’s go through an example. Figure 5-1(a) deals with an increase in demand. Figure 5-1(b) deals with a decrease in supply. 104 USING SUPPLY AND DEMAND s CHAPTER 5 105 Figure 5-1 (a and b) SHIFTS IN SUPPLY AND DEMAND When there is an increase in demand (the demand curve shifts outward), there is upward pressure on the price, as shown in (a). If demand increases from D0 to D1, the quantity of...
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...Public Disclosure Authorized WPS5314 Policy Research Working Paper 5314 Public Disclosure Authorized Regional Trade Agreements Caroline Freund Emanuel Ornelas Public Disclosure Authorized Public Disclosure Authorized The World Bank Development Research Group Trade and Integration Team May 2010 Policy Research Working Paper 5314 Abstract This paper reviews the theoretical and empirical literature on regionalism. The formation of regional trade agreements has been, by far, the most popular form of reciprocal trade liberalization in the past 15 years. The discriminatory character of these agreements has raised three main concerns: that trade diversion would be rampant, because special interest groups would induce governments to form the most distortionary agreements; that broader external trade liberalization would stall or reverse; and that multilateralism could be undermined. Theoretically, all of these concerns are legitimate, although there are also several theoretical arguments that oppose them. Empirically, neither widespread trade diversion nor stalled external liberalization has materialized, while the undermining of multilateralism has not been properly tested. There are also several aspects of regionalism that have received too little attention from researchers, but which are central to understanding its causes and consequences. This paper—a product of the Trade and Integration Team, Development Research Group—is part of a larger effort in...
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...Salvatore fdedi.tex V2 - 11/10/2012 9:37 A.M. Page iv International Economics Eleventh Edition Dominick Salvatore Fordham University VICE PRESIDENT & EXECUTIVE PUBLISHER EXECUTIVE EDITOR OPERATIONS MANAGER CONTENT EDITOR SENIOR EDITORIAL ASSISTANT CONTENT MANAGER SENIOR PRODUCTION EDITOR ASSOCIATE DIRECTOR OF MARKETING MARKETING MANAGER LEAD PRODUCT DESIGNER SENIOR MEDIA SPECIALIST DESIGN DIRECTOR SENIOR DESIGNER COVER PHOTO CREDIT George Hoffman Joel Hollenbeck Yana Mermel Jennifer Manias Erica Horowitz Lucille Buonocore Sujin Hong Amy Scholz Jesse Cruz Allison Morris Elena Santa Maria Harry Nolan Madelyn Lesure ©lightkey/iStockphoto This book was set in 10/12 Times Roman by Laserwords and printed and bound by R. R. Donnelley-JC. The cover was printed by R. R. Donnelley-JC. Copyright © 2013, 2010, 2007, 2004 John Wiley & Sons, Inc. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning or otherwise, except as permitted under Sections 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc. 222 Rosewood Drive, Danvers, MA 01923, website www.copyright.com. Requests to the Publisher for permission should be addressed to...
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...Basic Analysis of a Tariff Introductory Notes and Caveats These notes focuses mainly on mechanics, and getting comfortable with a model that we can use to picture the effects of different kinds of import restrictions on particular markets. We will concentrate on the policies of tariffs and quotas. In this discussion, the question you should always be able to answer is “who benefits and who suffers from this policy?” You may notice that when we analyze tariffs and quotas we are applying microeconomic tools, looking only at markets in individual goods and not at the big picture of overall trading patterns. This is because in order to focus in on a few questions we have to make tons of simplifying assumptions. One of those assumptions is the economist’s favorite ceteris paribus (“other things being equal”), which is the convenient assumption that we can look at changes in one market while assuming that everything else in our economy is not changing. (Note for example that in Ricardian trade theory we do assume that one market affects another, when productive factors from one industry move into another industry.) We also bring over a lot of other simplifying assumptions from neoclassical micro, such as the assumption of perfect competition in domestic industry. So beware: these are starkly oversimplified models that are useful because they help us think about issues. But be careful about naively using the results from a model as a guide to policy. The core intuition of this...
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...European Economic Policies 1. THE MULTIPLE DIMENSIONS OF AN ENLARGED EUROPE 1.1 THE HISTORICAL DIMENSION Many unprecedented achievements characterize the Europe we see today; for the first time since Charlemagneʼs Holy Roman Empire in the 9th century in the ninth century, most of the European continent (400 million citizens) is again united and in peace. For the first time (at least since the last century) a set of countries have autonomously decided to relinquish to a supranational authority the control of one of the key symbols of a nation, its currency, without renouncing their identity or independence (along with numerous innovations). All this in less than 60 years. Historically, a period of war in Europe has ended with one or more treaty (e.g. 30 years war → Westfalia, Napoleonic war → Vienna Congress, WW1 → Versailles) The end of WW2 produced a series of treaties which, among other things (UN), laid down the founding pillars of the modern European Union The First 40 years (1950 – 89) Its acknowledged that the start of the European integration can be identified in the “Schuman declaration” a speech by French foreign minister in 1950. He proposed that France and Germany and other nations wishing to join, pool their coal and steel resources. It was an opening of credit to Germany (only 5 years after the first tank left Paris) and it implicitly recognized the new world order with france and germany allied with the US. It was also a security measure for France with respect to Germany...
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...Deutscher Tropentag 2003 Göttingen, October 8-10, 2003 Conference on International Agricultural Research for Development An Analysis of the World Market for Mangos and its Importance for Developing Countries1 Jedele, Stefan, Angela Maria Hau, Matthias von Oppen University of Hohenheim, Agricultural Marketing in the Tropics and Subtropics, 70593 Stuttgart, Germany 1 Introduction To date, developing countries are facing massive economic and social problems. One possible way out of this misery seems to be the opening of the economy in order to participate in the gains arising from international trade. By increasing export volume and export revenues, developing countries expect to create a momentum and, thus, the impetus to stimulate the overall economy (Borchert, 2001: 497). 1.1 Problem Statement The importance of trade for the development process cannot be denied and neither can the importance of agriculture for the overall economy. In the 1950s and 1960s, agriculture was predominantly viewed as an exploitation source of production factors for more dynamic sectors of the economy. This opinion has since been heavily rejected. The role of agriculture has been elevated from a sector merely supplying resources to nourish industrialization to a sector of utmost importance, which increases export earnings, improves the employment situation, and raises the level of food security of developing countries (Alexandratos, 1995: 257-258). 1.2 Objectives and Hypothesis This paper deals...
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...CHAPTER ONE 1. Introduction The chapter covers the background of the study, the statement of the problem, the research questions and the study objectives. The chapter also extends to cover the assumptions on which the study is build and the study’s delimitation. It also highlights the limitations faced in carrying out the research and ways to minimize them. The importance of the research is also highlighted and a chapter summary wound up the chapter. 1.1 Background of the study Traditionally the government of Zimbabwe had been charging duty on imported goods in local currency. Enterprising Zimbabweans have been taking advantage of the overvalued Zimbabwean dollar to import cars and other luxury goods for resale in Zimbabwe. According to the central bank figures, Zimbabweans have been spending an estimated US$400000 a day importing an average of 80vehicles from Britain, Dubai, Japan, Singapore and the United states. This resulted in a boom in the used car industry. The business had become so brisk; some foreign car dealers were advertising their latest brands of cars in the Zimbabwean press. The government through Zimra moved from its traditional way of charging duty in local currency through the statutory instrument 80A of 2007 which stipulated that with effect from 5 April 2007, importers of cars and other luxury goods were now required to pay duty in foreign currency. “Payments of customs duty and value added tax on the importation of any items designated as luxury shall...
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...average total cost ATC1, marginal cost MC1, and price P1. b. The new process reduces Hi-Tech’s marginal cost to MC2 and its average total cost to ATC2, but the price remains at P1 because other firms cannot use the new process. Thus Hi-Tech earns positive profits. c. When the patent expires and other firms are free to use the technology, all firms’ average-total-cost curves decline to ATC2, so the market price falls to P3 and firms earn zero profit. Figure 5 Q8. a. The rise in the price of crude oil increases production costs for individual firms and thus shifts the industry supply curve up, as shown in Figure 3. The typical firm's initial marginal-cost curve is MC1 and its average-total-cost curve is ATC1. In the initial equilibrium, the industry supply curve, S1, intersects the demand curve at price P1, which is equal to the minimum average total cost of the typical firm. Thus, the typical firm earns no economic profit. Figure 3 b. The increase in the price of oil shifts the...
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...ECO 305 WK 7 QUIZ 6 CHAPTER 9 To purchase this visit here: http://www.activitymode.com/product/eco-305-wk-7-quiz-6-chapter-9/ Contact us at: SUPPORT@ACTIVITYMODE.COM ECO 305 WK 7 QUIZ 6 CHAPTER 9 ECO 305 WK 7 Quiz 6 - Chapter 9 MULTIPLE CHOICE 1. "Risk spreading" is a motive most likely to be served when firms undergo: a. Horizontal integration b. Vertical integration c. Conglomerate integration d. None of the above 2. The source (home) location of most of the world's leading multinational enterprises is: a. North America and Europe b. North America and Asia c. Europe and South America d. Europe and Asia 3. Which type of multinational diversification occurs when the parent firm establishes foreign subsidiaries to produce intermediate goods going into the production of finished goods? a. Forward vertical integration b. Backward vertical integration c. Forward horizontal integration d. Backward horizontal integration 4. Suppose that an American automobile manufacturer establishes foreign subsidiaries to market the automobiles. This practice is referred to as: a. Forward vertical integration b. Forward conglomerate integration c. Backward vertical integration d. Backward conglomerate integration 5. Suppose that a steel manufacturer headquartered in Japan sets up a subsidiary in Canada to produce steel. This practice is referred to as: a. Conglomerate integration b. Forward vertical integration c. Backward vertical integration d. Horizontal integration ...
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...ECON 125 HK2 ECONOMICS FOR MANAGERS Exam Solutions https://hwguiders.com/downloads/econ-125-hk2-economics-for-managers-exam-solutions/ ECON 125 HK2 ECONOMICS FOR MANAGERS Exam Solutions Exam 1: Question 1 Which of the following economic systems abolishes all private property? communism socialism fascism all of the above Question 2 The profit motive is one characteristic of a command economy. True False Question 3 In a market system, the government enforces laws ensuring that private enterprises and conditions of competition will prevail. True False Question 4 The most common type of business in the United States is the corporation. True False Question 5 Laissez-faire is a policy of no government intervention in the economic activities of individuals and businesses. True False Question 6 In a partnership, each partner’s liability is limited to his or her contribution to the partnership. True False Question 7 There are no government-regulated markets in the U.S. economy. True False Question 8 Which of the following is not among the United States’ economic goals? full employment stable prices healthy economic growth equal distribution of income Question 9 Under the U.S. market system, land and capital goods are owned mainly by the federal government individuals and firms local governments state governments Question 10 The biggest disadvantage of a sole proprietorship is the...
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...prices, output and income distribution through supply and demand phenomenon occurring in the market. This theory proposed that even if one variable changed, i.e. supply or demand, the market would stabilize and attain an equilibrium state automatically, since the other variable adjusted itself to the changing conditions in the market. Under the supply demand scenario, the income constrained individuals would be concerned with maximization of utility and cost constrained firms employing available information and factors of production, with profit. During the great depression, the financial meltdown initiated by Wall Street in 1929 wiped out billions of dollars of assets. The wealthy American's who owned almost all of the nation's stocks were hit hard by an 80% decline in value of the stocks. This also caused a rampant failure in the banking systems, with two out of three banks which collapsed between 1929-1933. All of this was as a result of abundance of materials. The supply side was excess with labor, but not with enough firms to hire them, and goods but not enough money to buy them. This is where the neo-classical theory failed to explain the causes of the great depression, as to why did not the market automatically adjust itself to attain an equilibrium state. The failure in the neo-classical theory was explained by Keynesian and Friedman's theories, which stated that the tragic disconnect between the needs the economy and the rational actions of the individuals gave way...
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...Iowa State University Digital Repository @ Iowa State University Graduate Theses and Dissertations Graduate College 2012 Three essays on biofuel, environmental economics, and international trade Jingbo Cui Iowa State University Follow this and additional works at: http://lib.dr.iastate.edu/etd Part of the Agricultural and Resource Economics Commons, Agricultural Economics Commons, Economics Commons, and the Natural Resource Economics Commons Recommended Citation Cui, Jingbo, "Three essays on biofuel, environmental economics, and international trade" (2012). Graduate Theses and Dissertations. Paper 12304. This Dissertation is brought to you for free and open access by the Graduate College at Digital Repository @ Iowa State University. It has been accepted for inclusion in Graduate Theses and Dissertations by an authorized administrator of Digital Repository @ Iowa State University. For more information, please contact hinefuku@iastate.edu. Three essays on biofuel, environmental economics, and international trade by Jingbo Cui A dissertation submitted to the graduate faculty in partial fulfillment of the requirements for the degree of DOCTOR OF PHILOSOPHY Major: Economics Program of Study Committee: Harvey Lapan, Co-major Professor GianCarlo Moschini, Co-major Professor Sebastien Pouliot John Schroeter Rajesh Singh Iowa State University Ames, Iowa 2012 Copyright c Jingbo Cui, 2012. All rights reserved. ii DEDICATION ...
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...Section 5: Conclusion------------------------------------------------------------------------------------13-15 Works Cited-----------------------------------------------------------------------------------------------16 Section 1: Introduction The United States should institute a blanket reform of its international trade policies. Its current protectionist practices are both in violation of current World Trade Organization suggestions and mandates and, far from being beneficial to the American economy, for the most part serve to hurt both American and foreign consumers. There are few American markets not protected in some way by the Federal Government in the form of tariffs, quotas, or domestic subsidies. While these practices are touted as an aid to domestic manufacturing process, true economic analysis shows that most if not all protectionist measures actually serve to limit economic growth. The arguments given to justify protectionism range from the poorly-disguised corporate handout to downright racism, while the few good reasons for it such as to protect 'sunrise' or developing industries do not apply to the United States. Section 2: What is Protectionism? Protectionism, defined simply, is any form of barrier to free trade that a governing body places on a market. By this definition, any trade legislation that the government...
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...competition and therefore more competitive prices. It is very important that governments develop smarts strategies that produce good results of exchanges while enabling them to comply with International Trade regulations to ensure that market function properly. As part of this paper Team A will discuss advantages, limitations and regulations of such important system. In addition it will analyze some factors that influence affecting foreign exchange rates. For a better analysis of International Trade Simulation and Report, Team A will evaluate concept summary results for the assessment and indentify the effects of government policy on economy behavior. One of the most important international trade advantages mention on the simulation is the free trade agreements between countries that tend to specialize in comparative products allowing each country to stimulate economic growth and the consumer’s benefits from the variety of quality products to choose from in bigger markets. Trade agreements, lower customs tariffs, and other trade barriers between countries which consequently benefit by the increase of the amount of goods that it could be trade, while at the same offers the benefit of creating new jobs. Equally important, international trade has contributed to the gross of domestic product (GDP) in most countries. On the other hand, the Free Trade Agreement (FTA) could be a limitation due to the fact that even when they lower the barriers for the countries that form part of agreement...
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...The Impact of Trade Liberalization on Gender Wage Differentials in India’s Manufacturing Sector* Nidhiya Menon, Brandeis University Yana van der Meulen Rodgers, Rutgers University April 2007 Abstract: As trade liberalization in India has unleashed a new wave of competitive forces in the economy since 1991, firms have faced growing pressure to cut costs in order to continue production. This study addresses the question of whether the increasing competitive forces from India’s trade liberalization affected the wages of male and female workers differently. Neoclassical theory implies that costly discrimination against female workers should diminish over time with increased competition (Becker 1971). We incorporate this idea into a theoretical model of competition and industry concentration in which the net impact of international trade on the gender wage gap could be positive or negative depending on the initial size of Becker’s discrimination coefficient. Our study tests the theoretical model using repeated cross sections of India’s NSSO household survey data merged with trade and production data from 1983 to 2004. We employ OLS and Fixed Effects techniques at the industry level to estimate the relationship between the male-female residual wage gap and measures of domestic concentration and international trade competition. Results indicate that increasing openness to trade is associated with a widening in the wage gap in India’s concentrated manufacturing...
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