Welfare Effects of Taxation and International Trade

Practice flashcards covering the key concepts related to the welfare effects of taxation and international trade.

Welfare Effect

The impact of taxes and trade on the economic surplus of consumers, producers, and the government.

Taxation

A financial charge imposed by the government on individuals or entities.

International Trade

The exchange of goods and services between countries.

Tariffs

Taxes on imported goods aim to protect domestic industries.

Consumer Surplus

The difference between what consumers are willing to pay and what they actually pay.

Producer Surplus

The difference between what producers are willing to accept for a good or service and what they actually receive.

Deadweight Loss

The loss of economic efficiency that occurs when the equilibrium outcome is not achievable or not achieved.

Total Surplus

The sum of consumer surplus, producer surplus, and government revenue.

Elasticity

A measure of how much the quantity demanded or supplied of a good responds to changes in price.

Inelastic Demand

A situation in which the quantity demanded does not change significantly when the price changes.

Inelastic Supply

A situation in which the quantity supplied does not change significantly when the price changes.

Gains from Trade

The increase in welfare or economic benefits that occurs from trading goods and services.

Import

A good or service brought into a country from abroad.

Export

A good or service sold to another country.

Infant Industries

Newly established industries in need of protection from international competition to develop.

Comparative Advantage

The ability of a country to produce a good at a lower opportunity cost than another country.

Welfare Loss from Tariff

The reduction in total welfare caused by the imposition of a tariff.

Specialization

The process of concentrating on and becoming expert in a particular skill or field.

Tariff Revenue

The income generated from tariffs imposed on imported goods.

Government Revenue

The income that the government collects from taxes, fees, and other sources.