Let's assume that two countries have imposed high tariffs on each other's products and services to the point where all trade between the two countries has disappeared
Assume a newly elected member of parliament in one of the countries makes a proposal for unilateral tariff reduction regardless of whether the other country wishes to follow suit. Explain why such a policy change would actually be a good idea.
The consumers in the country where the tariff reductions are put in place will no doubt benefit even though their producers may not see any change in their well being given that the other trading partner has not responded in kind. But this should not stop the efforts of this member of parliament since the change in policy will still make his country better off.
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Assume Ford Motor company purchases a robot that can do the welding work of ten union workers. If the robot is a perfect substitute for labor what can we be sure is true about the annual cost of using and maintaining one robot?
What will be an ideal response?
For an inferior good, if the income effect more than offsets the substitution effect, we call that good
A) a Giffen good. B) a normal good. C) an inferior good. D) a neutral good.