4.5 Some of the largest import tariffs, the tax on imported goods, are on shoes. Strangely, the higher the tariff, the cheaper the shoes. The highest U.S.

tariff, 67%, is on a pair of $3 canvas sneakers, whereas the tariff on $12 sneakers is 37%, while

$300 Italian leather imports have no tariff. (Adam Davidson, “U.S. Tariffs on Shoes Favor Well-

Heeled Buyers,” National Public Radio, June 12, 2007.) Laura buys either inexpensive, canvas sneakers ($3 before the tariff) or more expensive gym shoes ($12 before the tariff) for her children.

Use an indifference curve-budget line analysis to show how imposing the unequal tariffs affects the bundle of shoes she buys compared to what she would have bought in the absence of tariffs. Can you confidently predict whether she’ll buy relatively more expensive gym shoes after the tariff?

Why or why not?