what happens when there is a tariff imposed on imported goods?

Question

and that particular country has no capacity to produce that good,so that good is imported

in th case of subsitute this hypothetical country has no capacity to produce any electrical goos and the good being imported is mobile phones

and there is a 10% tariff

haggisofmat if you draw this for me I will vote u as best answer,email me at [e-mail]

thanks

haggisofmat if you draw this for me I will vote u as best answer,email me at [e-mail]

thanks

Answer 1

The one thing for sure is the price to the consumer goes up and the amount of that good consumed goes down. To get into nuts and bolts as to whether this is a good source of revenue (good in the sense that the foriegn firm pays it) depends on the supply and demand curves ie the elasticities. From what you stated, consumers have no substitutes that lends to a very inelastic demand. Or in english, consumers are not sensitive to price changes they are going to keep on buyin nearly the same amount. [this is where you should draw a graph with a very steep demand curve].
That is going to be bad for consumers and the domestic country.
You didn't give any info on the foreign suppliers. If there is a large world market for that good then in the domestic market the supply is going to be very elastic [ now add a sort of flat supply curve to your graph].
There is the starting point.
That is what is happening with no tariff.
Now put a tariff on. You do that by drawing another supply curve (we will assume you have a per unit tariff) all you do is add the amount of the tariff at each q. So let's say the tariff is $3 per unit. Then the new supply+tax curve would be found by adding $3 to each of the Qs at each price. If the Qs is 100 at a price of $10 now make the new curve Qs 100 at a price of $13. do this for every Qs.
find the new Eqm price and quantiy by lookin for da X (the intersection of the old demand and new supply+tax curve)
that is what the market is with the tariff.
Now to see who is paying the tax is a bit tricky but you can do it.
Here's what you do.
1) draw a dotted line straight down from the new Eqm all the down and hit the Q axis.
2) now go back and look at the pre-tariff Eqm price. draw a dotted line from that Eqm straight to the LEFT and hit the P axis
3) see where the dotted line from1) hit the old supply curve. take that point where it crosses and draw a dotted line over to the P axis
4)finally, draw a dotted line from the NEW Eqm over to the P axis.
whew, take a breath.
you should have 3 dotted lines going to the P axis.

** almost there**

the difference between the top one (4) and the middle one (2) that is how much of the tariff the consumers are paying.

the difference between the bottom one (3) and the middle one (2) that is how much the foreign firms are paying.

I know wow that was a long answer to what you thought was a short question. It sounds like a lot but just read through what I wrote again and do it step by step

Answer 2

One result is that this tax is a good source of revenue for the government. If people have to buy this imported product regardless of the price, then the government can levy a tax with out being concerned that people will stop buying the imported product. Thus tariffs are one of the oldest forms of taxation going back to ancient times because primitive governments often had no other way of raising revenue.

However, there are always domestic substitutes for any imported product. The tariff will cause demand for this product to decline at least to some extent. For example, suppose the imported product is oil which is not produced domestically. A tariff will raise the price of gasoline and other petroleum products, and the demand for them will decline especially over the long run as people have time to adjust (for example, buying more fuel efficient cars.).

This leads to the well known result that a tax (tariff) on imports is also a tax on exports. As imports decline because of the tax (tariff), the exchange rate will appreciate and exports will be hurt by the increased value of the currency. For this reason, exporting industries should oppose this tax on imports.

Answer 3

A tarriff, as the term is used in international trade, is a tax on importing a good or service inot a country, collected by customs officials at the place of entry.

Is this a "Specific" tarriff ($ per physical unit) or an "Ad valorem" tarrif (based of market price)?

* Effect on consumers: Price equalibrium is higer.
* Effect on producers: Varies based off demand
* Government: more income to spend on roads, bridges, military, and administration.

Answer 4

the product that is being imported cost the comsumer more.

Answer 5

Well, it depends..