Using the supply and demand equations below, calculate the impact of a proposed $20.00 tariff.
Qd = 21,000 – 50P
Qs = 1,000 + 30P
Current Price with international trade is $220 per unit
Now suppose that the current $220 price includes a 10% ad valorem tariff that will disappear with a new trade agreement. After the tariff is removed, solve for the following values.
What will be the loss in government revenue?
What will be the increase in consumer surplus?
What will be the increase in overall wealth for the country?