The following model assumes two countries in the world that are trading two goods: computers and...

 

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The following model assumes two countries in the world that are trading two goods: computers and automobiles. You are given the following relative supply and relative demand equations for a large home economy. Pc RS: =-4+ PA RD: Qc QA = 10-0.5. Suppose that the relative price of computers on the international markets is PC /PA = 3 (suppose that PC = 6 and PA = 2). a) Explain what an import tariff is and what are the main reasons for such a trade policy? What are the main types of import tariffs? (20 marks) b) The UK is planning to remove import tariffs on Malaysian palm oil. Briefly discuss the consequences of such trade policy on the UK's economy. What are the effects on producers, consumers, and the government? (25 marks) c) Plot both functions in a graph with the relative price of computers on the y-axis and the relative quantity of computers on the x-axis. Find the equilibrium relative quantity and relative price of computers in autarky. The following model assumes two countries in the world that are trading two goods: computers and automobiles. You are given the following relative supply and relative demand equations for a large home economy. Pc RS: =-4+ PA RD: Qc QA = 10-0.5. Suppose that the relative price of computers on the international markets is PC /PA = 3 (suppose that PC = 6 and PA = 2). a) Explain what an import tariff is and what are the main reasons for such a trade policy? What are the main types of import tariffs? (20 marks) b) The UK is planning to remove import tariffs on Malaysian palm oil. Briefly discuss the consequences of such trade policy on the UK's economy. What are the effects on producers, consumers, and the government? (25 marks) c) Plot both functions in a graph with the relative price of computers on the y-axis and the relative quantity of computers on the x-axis. Find the equilibrium relative quantity and relative price of computers in autarky.

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a An import tariff is a tax imposed by a government on imported goods The main reasons for implementing such a trade policy are Protection of domestic ... View the full answer