Adjustment to any shift in the domestic demand or supply of an importable commodity occurs:

Question

Quizplus · Accepted Answer

- With an import quota, the domestic price adjusts to the shift in demand or supply, as the quantity imported is fixed by the quota. 
- With a tariff, the quantity of imports adjusts to the shift in demand or supply, as the tariff increases the cost of imports and reduces their quantity demanded. 
- Both import quota and tariff can lead to adjustments through the market mechanism, although the mechanism may be different (price adjustment for the quota, quantity adjustment for the tariff). Therefore, all the options are correct.

Adjustment to Any Shift in the Domestic Demand or Supply