The US is known for its idea of freedom and a free market which Trump is trying to re-shape, but where we will arrive, we will see...

The US is known for its idea of freedom and a free market which Trump is trying to re-shape, but where we will arrive, we will see...

It is a misconception… that tariffs are paid by the foreign country… the cost is passed mostly to end-users, otherwise it's a value addition... it is a tax on US people's consumption... Higher prices mean lower welfare, lower real wages, and incomes...

Freedom in economic decisions" refers to the ability of individuals to make their own choices regarding economic activities like buying, selling, investing, and choosing employment without excessive government interference, essentially meaning the liberty to participate in the market according to their own preferences and priorities.

Key aspects of economic freedom:

Private property rights:

The right to own and control personal assets without arbitrary government seizure.

Free market competition:

The ability to engage in trade with whomever one chooses without price controls or market distortions.

Freedom of enterprise:

The ability to start and run a business without excessive regulatory hurdles.

Why is economic freedom important?

Economic growth:

Studies often show a correlation between high levels of economic freedom and higher GDP growth rates.

Innovation:

When individuals are free to make economic decisions, it can encourage creativity and entrepreneurial activity.

Improved standard of living:

Greater economic freedom can lead to increased wealth and better access to goods and services for individuals.

Factors that can limit economic freedom:

Excessive government regulation: Strict rules and regulations can restrict business operations and consumer choices.

High taxes: Heavy taxation can discourage investment and economic activity.

Corruption: A corrupt system can undermine property rights and create barriers to market entry.

 

In general, lower prices can lead to an increase in public welfare, as it allows consumers to purchase more goods and services with the same amount of money, thereby improving their standard of living; however, this relationship is not always straightforward and depends on factors like market dynamics, income distribution, and the specific goods involved.

Key points about lower prices and public welfare:

Increased consumer surplus:

When prices decrease, consumers experience a larger consumer surplus, which represents the difference between the price they are willing to pay and the actual market price, leading to greater satisfaction and overall welfare.

Improved affordability:

Lower prices make essential goods and services more accessible to a wider population, particularly benefiting low-income individuals.

Stimulating demand:

Lower prices can encourage increased consumption, potentially boosting economic activity and job creation.

Potential caveats to consider:

Producer impact:

If prices drop too low, producers may face profit losses, leading to reduced production, potential business closures, and job losses.

Quality concerns:

Sometimes, very low prices can indicate lower quality goods, which may negatively impact consumer welfare.

Market distortions:

Government interventions like price controls can sometimes lead to unintended consequences like shortages or inefficient allocation of resources.....

Price expectations affect supply by influencing how much producers are willing to sell currently based on their belief about future prices; if producers anticipate higher prices in the future, they tend to decrease their current supply to capitalize on potential future gains, while if they expect lower prices, they may increase their current supply to avoid potential losses, essentially causing a shift in the supply curve depending on the direction of the price expectation.

Key points about price expectations and supply:

Higher future price expectations lead to decreased current supply:

If producers believe the price of their product will rise in the future, they might hold back on selling now to benefit from the higher price later, causing a leftward shift in the supply curve.

Lower future price expectations lead to increased current supply:

Conversely, if producers anticipate a price drop in the future, they may try to sell more of their product now while the price is still relatively high, resulting in a rightward shift in the supply curve.

Example:

Seasonal produce: A farmer might choose to store a portion of their apple harvest if they expect prices to be higher closer to the holiday season, leading to a reduced current supply."

Higher price expectations might not help increase the domestic supply...