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    if you hang around i'll read up now and post something
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    (Original post by Veni_vidi)
    thanks again , i think this sounds a bit easier, i mean am only doing a-level, the other one sounds way more advanced .
    erm, yes, but i got no diagrams for you i don't think
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    the exchange rate complication.
    the Euro has gone up against the Sterling, how does this increased exchange rate of the euro affect the balance of payment of the uk and europe?

    it would be great if someone could shed some light on this? and all so how would investment in the uk and europe be affected?

    thanx alot
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    (Original post by well_tempered)
    if you hang around i'll read up now and post something
    your a star for doing that, thanx for helping
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    (Original post by Veni_vidi)
    your a star for doing that, thanx for helping
    Well, I've read just gone throught it, and nothings pop out of the page, except the situation you describe of rising foreign r, will shift the AD curve right.

    I think I would have more luck reading a chapter on international trade, nevermind, i'll try and read it later on, i'm all fogged up.

    So basically because it causes a shift in AD, you need to know the elasticity of the AS curve to be sure of the effects, that is you need to know prices will rise or firms instread will increase output, this depends on howmuch idle resources the economy has. So probably you couldn't answer the question without this knowledge. But you could guess.
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    (Original post by Veni_vidi)
    your a star for doing that, thanx for helping
    you reckon if the exchange rate falls, that's more exports, so greater demand for pounds, ie. right shift of Demand?
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    (Original post by well_tempered)
    That would be some sort of Infant Industry argument. The firm is like a child and needs to be nurtured until it can be left on its own to survive. Do the pros and cons. The cons are that there could be retaliation, and we'd be importing subsidized products and jobs would be lost in import competing industries...
    yep ok thanks.
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    (Original post by Apagg)
    ? Really? First year for me
    also I did a joint-degree in first year taking Geography, so no time for IS/LM unfortunately, i mean we might have done it but it wasn't in the recommended text.
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    I struggle quite a bit on evaluation. I was wondering, what are the main assumption/limitations of the tariff diagram and tariffs in general?

    I've talked about tariffs in relation to Mexico, where they've imposed tariffs on Chinese shoes so that Mexican shoes can compete.

    Also, i was wondering, looking at the diagram, one thing that confuses me is that, i know that after the tariff the foreign importer will be selling their goods at Pwt but what price do domestic suppliers sell their products at? It can't be pre trade prices becaue they are still higher than Pwt prices and so foreign importer would still profit. Do domestic suppliers also sell their products at Pwt?

    Also, is the following statement true or not: The tariff diagram is based on the assumption that the world price is lower than the price at the pre-trade equilibrium, without which, there would be little need for a tariff as consumers would choose domestic goods anyway.
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    Domestic producers would sell at the new Pwt, allowing them to sell more because of the increase in the world price and the upward sloping nature of the supply curve.
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    (Original post by sak-y)
    I struggle quite a bit on evaluation. I was wondering, what are the main assumption/limitations of the tariff diagram and tariffs in general?
    Retaliation, elasticities, trade agreements all come to mind.

    (Original post by sak-y)
    Also, i was wondering, looking at the diagram, one thing that confuses me is that, i know that after the tariff the foreign importer will be selling their goods at Pwt but what price do domestic suppliers sell their products at? It can't be pre trade prices becaue they are still higher than Pwt prices and so foreign importer would still profit. Do domestic suppliers also sell their products at Pwt?
    Domestic suppliers also sell their products at Pwt, but only up to the quantity where Pwt crosses the domestic supply curve. The difference between that quantity and the domestic demand at that price is made up by imports.

    (Original post by sak-y)
    Also, is the following statement true or not: The tariff diagram is based on the assumption that the world price is lower than the price at the pre-trade equilibrium, without which, there would be little need for a tariff as consumers would choose domestic goods anyway.
    Yes, I suppose so.
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    (Original post by alex_hk90)
    Retaliation, elasticities, trade agreements all come to mind.


    Domestic suppliers also sell their products at Pwt, but only up to the quantity where Pwt crosses the domestic supply curve. The difference between that quantity and the domestic demand at that price is made up by imports.


    Yes, I suppose so.
    agreed. summed up nicely what i was about to say!!!!
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    (Original post by alex_hk90)
    Retaliation, elasticities, trade agreements all come to mind.


    Domestic suppliers also sell their products at Pwt, but only up to the quantity where Pwt crosses the domestic supply curve. The difference between that quantity and the domestic demand at that price is made up by imports.


    Yes, I suppose so.
    What do you mean by trade agreements?

    and i understand how elasticites would affect it in my brain, but i'm not sure how to explain it?
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    (Original post by sak-y)
    What do you mean by trade agreements?

    and i understand how elasticites would affect it in my brain, but i'm not sure how to explain it?
    the extent/degree of the impact of the tariffs imposed may 'depend on' the elasticity of demand/supply. if demand for imports is relatively inelastic, then despite tariffs making imports more expensive, consumer demand for it would not change as much.
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    (Original post by sak-y)
    What do you mean by trade agreements?
    If the country you are discussing is part of a free trade area it will be unable to use tariffs on imports from other countries in the area. Similarly, if the country is part of a customs union (such as the EU) there will be a common external tariff and the country will also be unable to set its own tariffs on imports from other countries outside the area.
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    (Original post by Jibzy)
    the extent/degree of the impact of the tariffs imposed may 'depend on' the elasticity of demand/supply. if demand for imports is relatively inelastic, then despite tariffs making imports more expensive, consumer demand for it would not change as much.
    but there's one thing i don't understand...you say that the tariffs make the imports more expensive, but in effect the tariff means that both domestic and foreign suppliers are selling their goods at Pwt (world price+tariff) so it would make no different to the consumer which one they buy as they are both the same price so they may opt for the foreign goods?
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    that tarriff diagram always confuses me....i keep having to go over it! lol
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    The price of Pwt is higher than it was before the tariff as it makes the price of a good at any quantity of production is higher. The Pwt curve shifts upwards.
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    (Original post by sak-y)
    but there's one thing i don't understand...you say that the tariffs make the imports more expensive, but in effect the tariff means that both domestic and foreign suppliers are selling their goods at Pwt (world price+tariff) so it would make no different to the consumer which one they buy as they are both the same price so they may opt for the foreign goods?
    There should be an upward shift in the world supply curve shown in the diagram from Pw to Pw+t (I think you've called the latter Pwt).
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    (Original post by alex_hk90)
    There should be an upward shift in the world supply curve shown in the diagram from Pw to Pw+t (I think you've called the latter Pwt).
    Yeh sorry.

    But what i mean is, after the shift to the Pw+t curve - imports are being sold at that price, but so are domestic goods! so where's the incentive to buy the domestic good?
 
 
 
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