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Chapter 3: 6 (page 78)

A tariff is a tax on imported goods. Suppose the U.S. government cuts the tariff on imported flat screen

televisions. Using the four-step analysis, how do you think the tariff reduction will affect the equilibrium price and

quantity of flat screen TVs?

Short Answer

Expert verified

Equilibrium describes the economic scenario in which supply and demand for a certain commodity or service in the market are equal, resulting in a stable market price to buy and sell. In other words, at the current, stable market price, customers are purchasing the same value of goods or services that providers are prepared to supply.

Step by step solution

01

Step:1 Concept Introduction

The following is a four-step analysis:

(a) The demand and supply diagram for flat screen televisions is shown below. The equilibrium quantity is 'Q' and the equilibrium price is 'P'.

02

Step:2 Comparison 

(b) As the United States lowers tariffs on imported flat-screen televisions, demand for flat-screen television imports rises. The demand for television is positively affected as a result of the tariff reduction.

(c) Imported flat screen television demand moves to the right due to a tariff reduction. The demand shifts from D to D', as shown in the diagram below (rightward).

03

Step:3

(d) As demand swings to the right, the flat screen price climbs from to ', and the quantity grows from P to P '. This is due to a decrease in tariffs, which causes house consumers to want more flat screen televisions from one another. The scenario is shown in the diagram below.

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Most popular questions from this chapter

Name some factors that can cause a shift in the demand curve in markets for goods and services.

Table 3.9 illustrates the market's demand and supply for cheddar cheese. Graph the data and find the equilibrium. Next, create a table showing the change in quantity demanded or quantity supplied, and a graph of the new equilibrium, in each of the following situations:

(a) The price of milk, a key input for cheese production, rises, so that the supply decreases by 80 pounds at every price.

(b) A new study says that eating cheese is good for your health, so that demand increases by 20% at every price.

Price per poundQdQs
\(3.00750540
\)3.20700600
\(3.40650650
\)3.60620700
\(3.80600720
\)4.00590730
  1. Many changes are affecting the market for oil. Predict how each of the following events will affect the equilibrium price and quantity in the market for oil. In each case, state how the event will affect the supply and demand diagram. Create a sketch of the diagram if necessary.
    a. Cars are becoming more fuel efficient, and therefore get more miles to the gallon.
    b. The winter is exceptionally cold.
    C. A major discovery of new oil is made off the coast of Norway.
    d. The economies of some major oil-using nations, like Japan, slow down.
    e. A war in the Middle East disrupts oil-pumping schedules.
    f. Landlords install additional insulation in buildings.
    g. The price of solar energy falls dramatically.
    h. Chemical companies invent a new, popular kind of plastic made from oil.

How does a price ceiling set below the equilibrium

level affect quantity demanded and quantity supplied?

The computer market in recent years has seen many more computers sell at much lower prices. What shift in demand or supply is most likely to explain this outcome? Sketch a demand and supply diagram and explain your reasoning for each.

(a) A rise in demand

(b) A fall in demand

(c) A rise in supply

(d) A fall in supply
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