Curecon, a developing country, has recently become a member of the World Trade Organization (WTO). As part of its accession, Curecon is required to liberalize its trade policies. Consequently, the government has decided to remove a tariff on imported electronic goods, eliminate a quota on textile imports, and cease subsidies to its domestic sugar industry.
The goal of this activity is to understand the impact of these trade policy changes on various economic agents, including consumers, producers, and the government. Students are required to draw diagrams and analyze the effects of these policy changes on the economy of Curecon.
Table of Data:
To facilitate the construction of diagrams, the following data is provided. You can assume that each supply curve begins from the origin.
Task for Students:
Using the data provided, construct diagrams for each of the following scenarios:
- Removal of the tariff on imported electronic goods.
- Elimination of the quota on textile imports.
- Cessation of subsidies to the domestic sugar industry.
For each scenario, analyze the impact on various economic agents, including consumers, producers, and the government. Consider the following in your analysis:
- Changes in consumer and producer surplus
- Efficiency and welfare loss
- Implications for domestic production and imports
- Effects on government revenue and expenditure
- Broader consequences for the economy of Curecon, such as the potential for economic growth, employment, and income distribution.