When taxes such as excise taxes and indirect taxes such as VAT are placed by the government, the government takes into account the price elasticity of demand of a product and the response of the consumer if price were to rise. The tax burden depends on the price elasticity of demand to establish of whom is to take majority of the burden. When price elasticity of demand is inelastic, the consumer will take majority of the tax burden. Tax incidence falls on the group that responds the least to price and has the most inelastic curve. The tax burden can possibly be split evenly between producer and consumer, by the decision of the producer.
As we can see from Figure A, the government will gain the revenue from the tariff, area B. The price rise in imports means that there is a reduced demand for them and increased demand for domestic producers. This results in a gain for the producer, area E. The loss for the consumer, area C, this is where consumption is cut when Cf moves to Ct. Area A, is also a loss area, as when production increases from Qf to Qt production is inefficient, over the world price so this area is the extra cost that the economy pay for producing the good at home. We can summarize these gains and losses we can see that there is indeed a net loss for welfare: B - (E+A+B+C) + E = - (A-C). So are there any valid 'justifications' for the imposition of tariffs.
2003) By lenders and borrowers, it refers to individuals, businesses, financial instruments and governments. IR can be also categorised into nominal IR that is the stated one on financial market and real IR that implies the return of investment in terms of value. IR is said to be an indicator of economy situation and reflection of government policy as well. Therefore fluctuations of IR would have great impact on different areas in the economy and it is crucial to understand what determines it and how it would affect the world. This paper presents a general analysis of models of determinations s of interest rate, which are relevant to the UK economy.
The tax may be fixed (specific) or as a percentage of the value of the goods (ad valorem). Import tariffs help governments to increase revenue, protect local producers who gain and affect consumers who lose through higher priced goods. Import tariffs promote inefficiencies in local industries as goods are produced that could be more efficiently produced abroad. Export tariffs are less common. They are used to raise revenue on exports an... ... middle of paper ... ...d Beghin, J. C. (2012) Protectionism Indices for Non-Tariff Measures: An Application to Maximum Residue Levels.
Due to fluctuations in currency prices, it is sometimes possible for foreign exporters to charge unnaturally low prices for their products. This is called dumping and will greatly reduce the sales of the domestic competitor. A tariff can be added to artificially raise the price of the foreign product. While this comes at the expense of consumers who wish to buy the cheapest products, it benefits American businesses and thus can indirectly benefit cons... ... middle of paper ... ...edcontent.com/article/1362775/tariffs_import_quotas_and_exchange.html?cat=3. Accessed 03/02/10  Mike Moffatt.
To know what is happening in the economy, each country needs to monitor the changes in the product market and the market of production factors. Therefore, the country needs to know about the real macro economy such as: the value of production in a year, income from the production of goods, where output and income will go .etc .. To explain this, the economists have used the data to track the performance of the entire economy which one of them is the GDP. I. MEASURING GDP: 1. GDP and its importance : GDP ( Gross Domestic Product ) is one of the important indicators which every country around the world was concerned about even there has been debate saying that GDP was outdated.
Foreign consumers are inevitably not going to buy as much British goods. What’s more, as the imports are cheaper British people buy foreign goods. The UK used to be a major exporter of oil from the North Sea fields. Finally this market is now past its peak and doesn’t contribute much to the BOP. Protectionist methods are designed to make sure that domestic produce can compete with international produce so that there is a better balance of imports and exports.
Many economists have begun advocating major government intervention in order to balance out today’s economy. Our generation has witnessed Keynes theories be put to use in the U.S. and around the world. Some of these include the government bailing out major companies, and monetary stimulus to households. Keynes created the Aggregate Expenditure Model in order to achieve equilibrium in the economy and prevent recessions or depression from occurring. The Keynesian Aggregate Expenditure Model is a graphical model used to analyze “the basic components of Keynesian economics and to identify Keynesian Equilibrium as the intersection of the aggregate expenditures... ... middle of paper ... ...d States, Congress must first concur whenever changes in spending and taxes occur.
That is due to the reason that an increase in the level of interest rate leads to a relatively smaller current consumption, since borrowing from the future is not the ideal solution because it has become more expensive than before. Generally for a borrower current consumption always falls while savings rise. To conclude, I believe it is understandable by now that for a consumer who is a saver in the first period has not become worse off and in some occasions where the income effect exceeds the substitution effect has become better off. On the other hand a borrower in the first period has definitely become worse off than before. Works Cited http://www.digitaleconomist.org/tpc_4020.html http://www.uam.es/personal_pdi/economicas/mjansen/teaching/dynamicmacroenglish/lecture3_en_2012.pdf http://pioneer.netserv.chula.ac.th/~tsaksit/micro2/lecture2_1.pdf
Today it has become the key tool to measure and compare growth of economies in the world. GDP measures the value of economic activity within a country. More precisely, GDP is the sum of the prices of all final goods and services produced in the country during a period of time, normally a year. It measures the legal activities carried out by firms/ individuals and places a monetary value on their work. GDP which was originally GNP- Gross National Product, was used by the creator Simon Kuznets as well was John Maynard Keynes as a tool to help with decisions policy making and planning for war.