Scenario $1$: Suppose that, as part of an international trade agreement, the U$.$S$.$ government

reduces the tariff on imported chocolate.

Written Analysis for Scenario $1$: Will this affect the supply or the demand for chocolate?

$($Hint: It does NOT affect both curves.$)$ Which determinant of demand or supply is being

affected? How will the curve be affected? How will this change the equilibrium price and

quantity of chocolate? Explain your reasoning.

Graphical Analysis of Scenario $1$: Show the effect graphically in the market graph with

before$-$ and after$-$curves in the same graph: On graph paper, draw your starting curves in regular

pencil and the new affected curve using a colored pencil. Mark the original equilibrium quantity

and price in regular pencil with labels on each axis. Then, using your colored pencil, mark the

new equilibrium quantity and price similarly.

Final Comments on Scenario $1$: After the effect of tariff reduction, how did the market adjust?

Outline the steps of that adjustment starting with whether there was a surplus or shortage of

chocolate at the original equilibrium price after the effect? What happened next? Specifically,

what started happening to inventories at the original price and what did suppliers then do$?$ How

did those supplier actions affect consumer purchases?