Answer to Question #188293 in Economics for Alexandra Dorsey

Question

Hi, if a tariff increases the price of a product above the equilibrium price, how would that look and work on a diagram and would that mean the quantity of imports is completely 0?

Answer 1

If a tariff increases the price of a product above the equilibrium price, then the surplus of goods will occur, domestic quantity supplied will be above the quantity demanded, and the quantity of imports will become completely zero, because it will be inefficient, as at given price the domestic supply will cover all the demand.