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In United States, the demand and supply of calculators is described by:

D(us) = 500-25P
S(us) = 250+25P

In Japan, demand and supply is described by

D(japan) = 300-30P
S(japan) = 100+30P

problem 1: Suppose United States imposes an import quota of 30 calculators. What is the equivalent specific import tariff that would lead to the same prices in United States and Japan than the import quota of 30 calculators? describe briefly.

problem 2: What fraction of this specific tariff is reflected in the price change in United States and what fraction is reflected in the price change in Japan?

problem 3: Keep the specific tariff amount and the export supply curve constant. What would be the import demand curve, such that, without a tariff, the same equilibrium world price and quantity of trade would obtain but with the introduction of the same specific tariff, the United States price change would reflect 80% of the tariff amount?

problem 4: Graph the export supply curve and both the old import demand curve and the new import demand curve you found in problem 3 in a chart with the quantity of trade on the x-axis and the prices on the y-axis. describe briefly in your own words the intuitive reason(s) why the spillover of the tariff imposed by United States on Japanese prices with this new import demand curve is weaker than before. No new calculations, only explanations.

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M941791

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