Tag Archives | Net Welfare Effect of a Customs Union

Whether a customs union will increase or reduce net welfare is conditioned by the following factors: Effect # 1. Varying Elasticities of Demand and Supply Curves and Equal Price Differences: If the differences between pre-union free trade price (P2), the pre- union tariff-ridden price (P4) and post-union member country's price (P3) are exactly equal (P2P3 = P3P4) but the elasticities [...]