The diagram below shows the domestic demand and supply curves for denim jeans in Canada.The prevailing world price is P W .Assume that all jeans are identical. FIGURE 33-2
-Refer to Figure 33-2.Suppose Canada has free trade in jeans and then imposes a tariff of $t per pair.Canada's consumption will then be at the quantity

Question

The diagram below shows the domestic demand and supply curves for denim jeans in Canada.The prevailing world price is P W .Assume that all jeans are identical.  FIGURE 33-2
-Refer to Figure 33-2.Suppose Canada has free trade in jeans and then imposes a tariff of $t per pair.Canada's consumption will then be at the quantity

Quizplus · Accepted Answer

Before the tariff, Canada consumes at point A (QS1U1B0) where domestic demand intersects with world supply. After imposing a tariff, the price of jeans in Canada will increase to PC = PS1U1B1 + t. Domestic producers will now supply at least QS* (point B) because they can sell at a higher price. Canadian consumers now face a higher price and the quantity demanded decreases to QC = QS1U1B0 – t. The new equilibrium point is at E, where the domestic supply curve intersects with the new demand curve. The new quantity consumed is QS1U1B14S1U1B0.

The Diagram Below Shows the Domestic Demand and Supply Curves