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Economics Lecture Three (view source)

Revision as of 02:09, August 17, 2009

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But some goods cannot be resold.  Goods that are personal to the buyer, like a tailored suit or dress, cannot be resold.  Price discrimination works fine for personalized goods or exclusive markets, because there is not a resale market to destroy the discrimination.
 
But some goods cannot be resold.  Goods that are personal to the buyer, like a tailored suit or dress, cannot be resold.  Price discrimination works fine for personalized goods or exclusive markets, because there is not a resale market to destroy the discrimination.
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==Tariffs and Quotas==
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"Imports" are goods shipped into our country by a foreign country, for sale in our country.  China imports many goods that are sold in the United States by Wal-Mart, for example.
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There are valid reasons to discourage the sale of imports and encourage sale of goods made domestically (made in the United States).  The money paid for imports goes to the foreign companies, and support the foreign countries.  The sale of imports do not help Americans as much as the sale of made-in-America goods do.
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There are two approaches to disfavoring imports.  The primary way in history was to impose a tariff on imports.  A tariff is a tax on imports.  A tariff raises the price of imported goods, and the supplier must then reduce its received price to attain the same level where supply meets demand.  This has the effect of reducing supply.  Goods made domestically (in the United States) increase their sales due to the decrease in sales by the imports.  A tariff on a foreign-made car like the "Honda" would reduce the supply of Honda cars in the market.  American car companies would benefit from that, but consumers who want to buy more Hondas might not.
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The other approach to limiting imports is the use of quotas.  Instead of imposing a tariff on Hondas, our government could set an upper limit (quota) on the total number of Hondas that may be sold in the United States each year.  Quotas also reduce supply, but without generating any revenue to the government.  Instead, quotas have the effect of increasing the price of the good (Hondas in this case) with the higher price going to the company that sells the Hondas.  The government does not obtain any revenue from a quota, while it does obtain revenue from tariffs.
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Prior to the passage of the Sixteenth Amendment that legalized the income tax in 1913, and even long afterward, the major source of revenue for our national (federal) government in Washington, D.C. was tariffs.  But tariffs have long been controversial, and dividing the North (which liked them because they "protected" the northern manufacturers against competition from imports) and the South (which disliked them because it increased the prices of goods they purchase and caused foreign nations to retaliate by placing tariffs on cotton and other exports from the South).  Tariffs were a major cause of the Civil War.
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Today tariffs are rarely used and the government relies almost entirely on the income tax for funding.
    
==Assignment==
 
==Assignment==
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