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Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364

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BuyFindarrow_forward

Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364
Textbook Problem

A tariff is a tax on imported goods. Suppose the U.S. government cuts the tariff on imported flat screen televisions. Using the four-step analysis, how do you think the tariff reduction will affect the equilibrium price and quantity of flat screen TVS?

To determine

Use the four step analysis to show the impact of tariff reduction on the equilibrium price and quantity of flat screen TVs.

Explanation

The four step analysis is given below:

(a) The demand and supply diagram is given below for flat screen televisions. The equilibrium price is ‘P’ and equilibrium quantity is ‘Q’.

(b) As the US government reduces tariff on imported flat screen televisions, the demand for imports of flat screen television rises. Due to a reduction in tariff, the demand for television is affected in a positive manner.

(c) Due to a reduction in tariff, the demand for imported flat screen television shifts to right...

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