The domestic supply and demand curves for chick peas are as follows:
Supply: QS = P - 50 Demand: QD = 100 - P/2
where P is the price in cents per kilo and Q is the quantity in millions of kilos. Canada is a small producer in the world chick pea market, where the current world price (which will not be affected by anything we do) is 60 cents per kilo. The Government is considering a tariff of 40 cents per kilo.
a. Determine the domestic production and consumption of chick peas and the amount of chick peas imported prior to the imposition of the tariff. b. What is the domestic price of chick peas that will result if the tariff is imposed? What will imports be after the tariff?
c. Compute the dollar gain or loss to domestic consumers, domestic producers, government revenue and the deadweight loss resulting from the tariff.