Suppose that, to support domestic employment, the government imposes a (33.3 %) tariff on imports of clothing.
Question:
Suppose that, to support domestic employment, the government imposes a \(33.3 \%\) tariff on imports of clothing. Fareeha spends ₹8,000 on dresses each month. Before the tariff, the price of a dress produced domestically is ₹ 400 and the price of a foreign-made dress is ₹300. Use an indifference curve-budget line analysis to show how imposing this tariff affects the quantity of dresses she buys compared to what she would have bought in the absence of the tariff. Will she buy a relatively higher number of domestically produced dresses after the tariff? Why or why not?
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To analyze how the imposition of a 333 tariff affects Fareehas consumption of dresses we can use an indifference curve and budget line analysis Before ...View the full answer
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