1. (c) 2001 J. Douglass Klein Welcome to Economics 24: Competing Philosophies in US Economic Policy

2. (c) 2001 J. Douglass Klein

3. Please go to: http://online.union.edu Login: your e-mail user name Password: Your student ID Click on Economics 24

4. (c) 2001 J. Douglass Klein Syllabus Course rules Reading outline Computer requirements How to use Blackboard - Tools - Survey - Discussion

5. (c) 2001 J. Douglass Klein Molasses Act - Economic Concepts Supply and Demand in a market determine the market price. A shift in Supply results in a new equilibrium price. A tax on imports is designed to cut supply and raise price. A tax on imports may create incentives for smuggling because two prices exist in two different places. The discouragement to British sugar planters is because lower prices (to them) reduce (and maybe even eliminate) their profit.

6. (c) 2001 J. Douglass Klein Supply and Demand in a market determine the market price. Quantity Price Supply Demand P1P1 Q1Q1

7. (c) 2001 J. Douglass Klein A shift in Supply results in a new equilibrium price. Quantity Price Supply Demand P1P1 Q1Q1 S’ P2P2 Q2Q2

8. (c) 2001 J. Douglass Klein A tax on imports is designed to cut supply and raise price. Quantity Price Demand S’ P2P2 Q2Q2 T S’ + Tax P3P3

9. (c) 2001 J. Douglass Klein A tax on imports may create incentives for smuggling because two prices exist in two different places. Quantity Price Demand S’ P2P2 S’ + Tax T P3P3 P 3 is paid by British buyers. P 2 is paid by other buyers. Smugglers can buy at P 2 and sell at P 3. Can you think of a modern parallel?

10. (c) 2001 J. Douglass Klein The discouragement to British sugar planters is because lower prices reduce (and maybe even eliminate) their profits. Quantity Price MC AC One (small) British Planter (price taker) P1P1 P2P2 Prices given by entire market S&D Profit Q1Q1 Loss Q2Q2

11. (c) 2001 J. Douglass Klein Differences between the Northern and Southern American Colonies. “…our northern settlements, we have found, are full of farmers, fisherman, seamen; -but no planters. This is precisely the case with Britain herself; consequently a rivalry between them must inevitably take place.” (p. 96) “American corn cannot come to an European market without doing mischief to the corn trade of England” (p. 97) Under which circumstances will there be the greatest gains from trade?