Years ago, an apple producer argued that the United States should enact a tariff, or a tax, on imports of bananas.
His reasoning was that "the enormous imports of cheap bananas into the United States tend to curtail the domestic consumption of fresh fruits produced in the United States."
a. Was the apple producer assuming that apples and bananas are substitutes or complements? Briefly explain.
b. If a tariff on bananas acts as an increase in the cost of supplying bananas in the United States, use two demand and supply graphs to show the effects of the apple producer's proposal. One graph should show the effect on the banana market in the United States, and the other graph should show the effect on the apple market in the United States. Be sure to label the change in equilibrium price and quantity in each market and any shifts in the demand and supply curves?