Supply and Demand with Carbon Tax Analysis

The prevailing price of a good in the global market.

Selling a good to another country.

Buying a good from another country.

When a country can produce a good at a lower opportunity cost than another country.

Government policies that limit imports to protect domestic industries.

The difference between a consumer's willingness to pay (WTP) and the price they actually pay for a good.

The highest price a consumer is willing to pay for a good or service.

The difference between the price a seller receives and the seller's willingness to sell (WTS).

The minimum price a seller is willing to accept for a good or service.

The total value of the resources (time, materials, etc.) that a seller gives up to produce a good.

Illustrates how individual willingness to pay (WTP) varies, leading to a dynamic price at which consumers benefit (surplus).

The overall satisfaction and prosperity of consumers.

The additional gain from producing or consuming something beyond the cost/price.

A situation where governments do not restrict the import or export of goods.

Individuals within a country who buy goods and services.

Companies and individuals within a country that produce goods and services.

Individuals or groups that benefit from international trade, such as consumers who gain access to cheaper goods.

Individuals or groups negatively affected by international trade, such as domestic producers who face competition from cheaper imported goods.

The net benefit to a country from participating in international trade, resulting from lower prices, increased choices, and greater efficiency.

Imports often provide consumers with access to cheaper and more diverse goods, leading to higher consumer welfare.

Imports can create competition for domestic producers, leading to lower prices or reduced market share.

The total cost of production divided by the quantity produced. It represents the average cost per unit.

The additional cost incurred by producing one more unit of output.

The average total cost curve typically has a U-shape due to diminishing marginal returns. Initially, ATC falls as production increases due to economies of scale, but eventually rises as increasing production becomes less efficient.

The marginal cost curve intersects the average total cost curve at its minimum point. This occurs because when marginal cost is below average total cost, ATC is decreasing, and when MC is above ATC, ATC is increasing.

In the short run, some inputs (usually capital) are fixed. In the long run, all inputs are variable. This distinction is important because firms have different cost structures in the short run vs. long run.

Marginal revenue (MR) reflects the additional revenue gained from selling one more unit of a product.

When marginal revenue (MR) exceeds marginal cost (MC), increasing production leads to higher profits. The company should produce more.

When marginal revenue (MR) is less than marginal cost (MC), increasing production results in lower profits. The company should produce less.

Profit maximization occurs when a company produces the level of output where marginal revenue (MR) equals marginal cost (MC). This is the point of highest profit.

A tax imposed on imported goods, increasing their price.

Surge pricing might be efficient if it increases total surplus by appropriately reflecting the value people place on their time, leading to a more efficient allocation of resources. Studies have shown that surge pricing can significantly increase driver supply.

The fairness of surge pricing is debatable. While it can benefit those willing to pay higher prices, it can also burden those with limited resources, especially during emergencies or essential needs. This raises ethical questions about what's just during times of crisis.

Surge pricing is more effective when demand is inelastic - people are willing to pay higher prices because there are limited alternatives or the good is essential. This is because inelastic demand results in a proportionally smaller decrease in quantity demanded, making surge pricing more profitable.

Opponents of free trade argue that it destroys domestic jobs, as companies may relocate or face competition from cheaper imports. While it's true some jobs might be lost, free trade also creates new jobs in areas where the country has a comparative advantage.

Some argue that reliance on foreign suppliers for essential goods, like steel used for defense, poses a national security risk. This is especially relevant during times of conflict. However, it's important to be cautious about using this argument as a shield for inefficient industries.

This argument suggests that new domestic industries need temporary protection from foreign competition to grow and mature, allowing them to compete more effectively in the future. Governments may offer subsidies or tariffs to shield these industries.

This argument claims that foreign companies engage in 'unfair' practices like dumping (selling products below cost) or exploiting labor, giving them an advantage in the global market. This can make it difficult for domestic firms to compete.

Governments might use trade restrictions as leverage in international negotiations. They threaten to limit imports if other countries don't concede on certain issues, hoping to gain favorable trade deals.