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Chapter 3: Q 44. (page 79)

Use the four-step process to analyze the impact

of a reduction in tariffs on imports of iPods on the

equilibrium price and quantity of Sony Walkman-type products.

Short Answer

Expert verified

The demand for iPods increases.

Step by step solution

01

Step 1.Terrifs.

A tariff is a type of tax levied by a country on an imported good at the border. As a protectionist tool, a tariff increases the prices of imports.

02

Step 2.4 step approach.

1. Reduction in tariff on imports of iPods affect the demand for sony walkman and iPods both.

2. as the tariffs are less now so the seller import more iPods at decreased prices.

3. Because of this the price of iPods decreases and the demand increases because of decreased price.

4. Demand for sony walkman decreases because of the price decrease of substitute goods which is the ipod.

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Most popular questions from this chapter

A low-income country decides to set a price ceiling on bread so it can make sure that bread is affordable to the poor. Table 3.11 provides the conditions of demand and supply. What are the equilibrium price and equilibrium quantity before the price ceiling? What will be the excess demand or the shortage (that is, quantity demanded minus quantity supplied) be if the price ceiling is set at \(2.40? At \)2.00? At \(3.60?

PriceQdQs
\)1.609,0005,000
\(2.008,5005,500
\)2.408,0006,400
\(2.807,5007,500
\)3.207,0009,000
\(3.606,50011,000
\)4.006,00015,000

What is consumer surplus? How is it illustrated on

a demand and supply diagram?

What is the relationship between quantity

demanded and quantity supplied at equilibrium? What is

the relationship when there is a shortage? What is the

relationship when there is a surplus?

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.

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?
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