ENDURING UNDERSTANDING

POL-1
Government policies influence consumer and producer behavior and therefore affect market outcomes.

LEARNING OBJECTIVE ESSENTIAL KNOWLEDGE
  • POL-1.B
    a. Define tariffs and quotas.
    b. Explain (using graphs where appropriate) how markets are affected by public policy related to international trade.
    c. Calculate (using data from a graph or table as appropriate) changes in market outcomes resulting from public policy related to international trade.
ESSENTIAL KNOWLEDGE
  • POL-1.B.1
    Equilibria in competitive markets may be altered by the decision to open an economy to trade with other countries; equilibrium price can be higher or lower than under autarky, and the gap between domestic supply and demand is filled by trade. Opening an economy to trade with other countries affects consumer surplus, producer surplus, and total economic surplus.
  • POL-1.B.2
    Tariffs, which governments sometimes use to influence international trade, affect domestic price, quantity, government revenue, and consumer surplus and total economic surplus.
  • POL-1.B.3
    Quotas can be used to alter quantities produced and therefore affect price, consumer surplus, and total economic surplus.