Some of the largest import tariffs (taxes on only imported goods) are on shoes. Strangely, the tariff is higher on cheaper shoes. The highest U. S. tariff, 67%, is on a pair of $ 3 canvas sneakers, while the tariff on $ 12 sneakers is 37%, and that on $ 300 Italian leather imports is 0%. (Adam Davidson, “U. S. Tariffs on Shoes Favor Well-Heeled Buyers,” National Public Radio, June 12, 2007,
Laura buys either inexpensive, canvas sneakers ($ 3 before the tariff) or more expensive gym shoes ($ 12 before the tariff) for her many children. Use an indifference curve and budget line figure to show how imposing these unequal tariffs affects the bundle of shoes that she buys compared to what she would have bought in the absence of tariffs. Can you confidently predict whether she’ll buy relatively more expensive gym shoes after the tariff? Why or why not?