Tariff Instruments. Eco 3024F Krugman & Obstfeld Ch 8. Outline. Introduction: Relevance of tariffs Types of tariffs Partial equilibrium analysis of tariffs Costs and benefits of tariffs LATER: Analysis of Tariffs (GE framework) Trade policy in presence of monopolies. 8- 2.
Krugman & Obstfeld
“Tariff -- A scale of taxes on imports, designed to protect the domestic producer against the greed of his consumer”.
From Ambrose Bierce, The Devil's Dictionary:
Import demand curve (MD):
SA demand –SA supply= Import demand by SA (from US)
Import demand curve is downward sloping....why?
What happens if P is above A?
Export supply curve is upward sloping....why?
What is happening at point B?
At Pw , XS=MD in SA
Will Pw be the mkt clearing price in US as well?
Domestic price rises and quantity of imports demanded falls
Foreign price falls and quantity of exports supplied falls
Gap between domestic and international price equals tariff wedge