tariff??

2007-03-14 5:47 am
why tariff lead to a rise in domestic output and a reduction in consumption??

回答 (1)

2007-03-16 10:48 am
✔ 最佳答案
Consider a small open economy, while the domestic equilibrium price is higher than the world price. So demand of the good is large than the domestic supply of the good, so the difference is the import.
Now a tariff is imposed, the international effective price rises, leading the quantity demand decrease, and with a higher price, domestic supplier are willing to produce more goods, so the domestic output rises, domestic consumption reduces and import also reduces
參考: self


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