State how the following is affected after the tariff is imposed;World price, domestic supply and government revenue?

Answer 1

After a tariff is imposed, the world price typically increases as the tariff creates a barrier to trade that limits the amount of imported goods entering the domestic market. This increase in world price can lead to higher prices for consumers in the domestic market.

Domestic supply may also be affected by the tariff. If domestic producers are able to compete with the higher priced imports, they may increase their production to meet the demand previously filled by imports. However, if domestic producers are unable to meet the demand, there may be a shortage of goods in the domestic market.

Government revenue is also affected by the imposition of a tariff. The government earns revenue from the tariff collected on imported goods. This revenue can be used to fund government programs and services, or reduce other taxes. However, if the tariff leads to a decrease in imports, the government may see a decrease in revenue if the amount collected from the tariff is not enough to offset the decrease in imported goods.