Answer to Question #119019 in Macroeconomics for Aynul

Question

Suppose the US government imposes a tariff on Asus graphics cards that are imported into the US. Explain the impacts (different groups of the economy will be affected) using diagrams.

Answer 1

Tariffs refers to taxes imposed on imports. When the United States of America imposes taxes on import of Asus graphic cards various groups will be affected.

The first group to be affected will be the producers themselves since before the imposition of the tariffs they were not being taxed on imports for instance they will start by increasing the prices of the Asus graphic cards in order to cater for the taxes that they were not being imposed before.

When the Asus graphic cards are received by the respective person in order to distribute them they will increase the prices to those who use Asus graphic cards.

Since the prices of the Asus graphic cards have increased some people will look for substitutes from other companies. When the substitute is found it will definitely reduce the demand for the Asus graphic cards and create the demand for the other company that is manufacturing the graphic cards.

The revenue for the United States of America (USA) will also rise.

The following graphs shows when the Asus graphic cards are imposed on taxes.

A)    The price of the Asus graphic card will rise but the quantity demanded will reduce.

A)    The revenue will increase.