We have to answer the following exercise for our module dealing with Tariff and non tariff measures:

The domestic demand for good X is Dd = 100 -20P. The domestic supply of good X is Sd= 20 + 20P.

a) Draw the domestic demand and supply curves for good X. Mention how you would relate this partial equilibrium model to a general equilibrium model.

b) If the country allows no trade in goodX, what are the equilibrium price, quantity produced and quantity consumed?Can you relatethe price of X to the price of other products (as a numeraire) in a general equilibrium framework?

c) Imports of good X are available in the world market at PX= 1. Draw the total supply curve. If the country allows free trade in good X, what are the equilibrium price, quantity produced domestically, quantity consumed domestically and quantity imported?

d)If the county imposes a specific tariff of t = 0.5 per unit of imported X, what are the equilibrium price, quantity produced domestically, quantity consumed domestically and quantity imported?

e)Who gains and who loses from the tariff? Does national welfare rise or fall?