Question
The market demand and supply functions for imported high fashion ladies shoes in Canada are estimated as follows: P=150-0.00005Q p=50+0.0002q a) Determine the equilibrium market
The market demand and supply functions for imported high fashion ladies shoes in Canada are estimated as follows:
P=150-0.00005Q
p=50+0.0002q
a) Determine the equilibrium market price (P) and qty exchanged annually of shoes and sketch the demand supply diagram showing the equilibrium values. what is the total revenue accruing to shoe importers.
b) Suppose that in response to complaints by domestic shoe manufacturers the government considers the imposition of a tariff (excise tax) of $20 per pair on the importation of shoes. Determine the new equilibrium price and qty exchanged if this tariff is applied. what will the net revenue to the government from the tarriff.
c) Suppose that as a counter measure the government proposes a quota to restrict the importation of shoes to Q = 300,000 units per annum, instead of the tariff. Determine the new equilibrium price and quantity exchanged. What will be the revenue accruing to the shoe importers ? What will be the flow of tax revenue to the government? d) If you were economic advisor to the show importers association, which of the two options would you recommend to your members ?
d) If you were economic advisor to the show importers association, which of the two options would you recommend to your members ?
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