Changes

There are valid reasons to discourage the sale of imports and encourage the sale of goods made domestically (made in the United States).  The money paid for imports goes to the foreign companies, and support the foreign governments.  The sale of imports do not help Americans as much as the sale of made-in-America goods do.

There are valid reasons to discourage the sale of imports and encourage the sale of goods made domestically (made in the United States).  The money paid for imports goes to the foreign companies, and support the foreign governments.  The sale of imports do not help Americans as much as the sale of made-in-America goods do.

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) can then 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.

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) can then 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, although consumers who want to buy more Hondas might not.

   

   

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 '''''quantity''''' 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.  Quotas help the foreign companies more than tariffs do, without bringing revenue to the government imposing the quota.

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 '''''quantity''''' 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 United States government does not obtain any revenue from a quota, while it does obtain revenue from tariffs.  Quotas help the foreign companies more than tariffs do, without bringing revenue to the government imposing the quota.

Prior to the passage of the Sixteenth Amendment that legalized the income tax in 1913, and even afterward, the major source of revenue for our national (federal) government in Washington, D.C. was tariffs.  But tariffs have long been controversial, and divided 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.

Prior to the passage of the Sixteenth Amendment that legalized the income tax in 1913, and even afterward, the major source of revenue for our national (federal) government in Washington, D.C. was tariffs.  But tariffs have long been controversial, and divided 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.

==Price Controls==

==Price Controls==

So far we have been talking about economic exchanges in the free market, in the absence of government controls.  But the government does interfere in many ways in our economy.  America enjoys more free enterprise than any other large country, but our government does regulate many types of markets, and even controls some of them.

So far we have been talking about transactions in the free market, in the absence of government controls.  But the government does interfere in many ways in our economy.  America enjoys more free enterprise than any other large country, but our government does regulate many types of markets, and even controls some of them.

During World War II, the government imposed controls to prevent companies from raising prices during the war.  The needs of our military for goods increased demand that would ordinarily shift the demand curve and increase prices.  But the government prohibited this from happening by limiting price increases.  "Price controls" are limits on the prices at which certain goods can be sold.

During World War II, the government imposed controls to prevent companies from raising prices during the war.  The needs of our military for goods increased demand that would ordinarily shift the demand curve and increase prices.  But the government prohibited this from happening by limiting price increases.  "Price controls" are limits on the prices at which certain goods can be sold.

[[File:Price control curves 0001.jpg|600px]]

[[File:Price control curves 0001.jpg|600px]]

When a price control causes a difference between the supply quantity and the demand quantity, it is the lower quantity that becomes the market.  The market can never be more than the lesser of the quantity in supply and the quantity in demand.  Because the quantity supplied is much less than the quantity demanded in the graph, a shortage results.

When a price control causes a difference between the supply quantity and the demand quantity, it is the lower quantity that becomes the market.  The market can never be more than the lesser of the quantity in supply and the quantity in demand.  Because the quantity supplied is much less than the quantity demanded in the above graph, a shortage results.

Rent control in New York City is an example of a price control that has terrible effects.  The people lucky enough to be a rent controlled apartment pay much less than the market rate, and never move out.  New housing is not created as quickly as it should be, because landlords are not sure they will always be able to charge the market rate.  Nearly every economist, liberal or conservative, agrees that rent control is harmful, and yet liberal politicians impose it in most big cities.

Rent control in New York City is an example of a price control that has terrible effects.  The people lucky enough to be a rent-controlled apartment pay much less than the market rate, and never move out.  New housing is not created as quickly as it should be, because landlords are not sure they will always be able to charge the market rate.  Nearly every economist, liberal or conservative, agrees that rent control is harmful, and yet liberal politicians impose it in most big cities.

== Minimum Wage ==

== Minimum Wage ==