ECON 040 Lecture Notes - Lecture 9: Deadweight Loss, Pareto Efficiency, Imperfect Competition
5 Aug 2020
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Tariffs provide domestic producers an advantage as it prevents international producers from undercutting them. Quotas and tariffs essentially achieve the same goal- they increase the market price of a good, resulting in a lower quantity demanded. When a quota is determined, we shift the supply curve right by the amount that the quota needed us to (e. g. stotal = sdomestic + squota), resulting in an equilibrium price of . In previous chapters, we have only discussed markets which maximise total surplus and discuss factors such as the invisible hand principle and pareto efficient markets that require no government intervention (i. e. perfectly competitive markets). However, perfectly competitive markets are rarely seen in real life. For an imperfectly competitive market, at least 1 of the following must occur: Consumers and suppliers aren"t price takers (i. e. suppliers set prices to whatever they want) Goods are not homogenous (1 has a clear advantage over another) An example of a monopoly is australia post,
