ECON 2010 Lecture Notes - Lecture 21: Deadweight Loss, Economic Surplus, Unfair Competition
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ECON 2010 Full Course Notes
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Trade will cause quantity demanded to not equal quantity supplied. Trade increases total surplus, banning trade increases dead weight loss. Tariffs are a per-unit tax on imports that restrict trade. There are some logical arguments against free trade however: jobs. In theory, producer surplus can be reallocated to make those hurt by trade better off (cid:271)ut u(cid:374)fortu(cid:374)atel(cid:455) i(cid:374) realit(cid:455) it does(cid:374)"t (cid:449)ork that (cid:449)a(cid:455). Cou(cid:374)tries enact programs to protect those hurt by free trade but politics are slow and it takes years to activate new programs: national security. Germany in world war 1 is a perfect example of this problem. German food prices were way higher than the global food prices. Therefore germany never needed to develop a strong agricultural sector because it was always cheaper to import food than produce their own. Then every country cut off trading routes to. Germany during world war 1 and they had a massive food shortage costing them the war.
