Question:
Showing a Domestic Supply and Domestic Demand Diagram, how can a Tariff lead to more Domestic Supply and Less Domestic Demand?
Author: eric_galvaoAnswer:
-The Price, with a Tariff, will be raised -This leads to a Contraction in Domestic Demand, and thus a Consumer Surplus being reduced too -But the Domestic Supply will Increase, and thus Producer Surplus will Expand too -Governments get Tax Revenue of Rectangle with Width being Difference in Quantity Demanded and Supplied and Length being Difference in Price with Tariff and Price without Tariff
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