Answered step by step
Verified Expert Solution
Question
1 Approved Answer
The following model assumes two countries in the world that are trading two goods: computers and automobiles. You are given the following relative supply
The following model assumes two countries in the world that are trading two goods: computers and automobiles. You are given the following relative supply and relative demand equations for a large home economy. Pc RS: =-4+ PA RD: Qc QA = 10-0.5. Suppose that the relative price of computers on the international markets is PC /PA = 3 (suppose that PC = 6 and PA = 2). a) Explain what an import tariff is and what are the main reasons for such a trade policy? What are the main types of import tariffs? (20 marks) b) The UK is planning to remove import tariffs on Malaysian palm oil. Briefly discuss the consequences of such trade policy on the UK's economy. What are the effects on producers, consumers, and the government? (25 marks) c) Plot both functions in a graph with the relative price of computers on the y-axis and the relative quantity of computers on the x-axis. Find the equilibrium relative quantity and relative price of computers in autarky.
Step by Step Solution
★★★★★
3.42 Rating (152 Votes )
There are 3 Steps involved in it
Step: 1
a An import tariff is a tax imposed by a country on imported goods It is a trade policy measure that raises the price of imported goods making them less competitive compared to domestically produced g...Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started