Answer to Question #171955 in Microeconomics for Alice Namwila

Question

Suppose that, as part of an international trade agreement, the Zambian government reduces the tariff on imported fish. Will this affect the supply or the demand for Fish? Why? Which determinant of demand or supply is being affected? Show graphically with before- and after-curves on the same axes. How will this change the equilibrium price and quantity of Fish? Explain your reasoning.

Answer 1

S1 initial Supply curve

S2 current Supply curve

D demand curve

P1 initial Price

P2 Current Price

E1 initial equilibrium

E2 Current equilibrium

Q1 Initial quantity supplied

Q2 current quantity supplied

A reduction in tariffs leads to a decreased cost of production and therefore the cost of fish imported is relatively lower. This thereby leads to an increase in the demand for fish due to lowered prices.

An increase in Demand for fish will therefore encourage more importation of fish thereby an increase in the amount import

The equilibrium quantity and price changes thereby changing the equilibrium points as the market as to adapt to the new changes in prices and quantity.

This effect is illustrated below