Employing a general-equilibrium approach, describe the effect of a new law that prohibits steel imports
What will be an ideal response?
The initial effect is that the supply curve for steel shifts leftward. This raises the price of steel. The largest users of steel are the automobile industry, the construction industry, and the appliance industry. The increased cost of inputs will raise the price of the goods produced by these industries. Given time, these industries will look to substitute plastic or aluminum in place of steel, raising the prices of these materials.
You might also like to view...
Why are externalities called market failures? Are pecuniary externalities also an example of market failure?
What will be an ideal response?
Which of the following is a positive statement?
a. Heavy snowfall drives up the demand for heaters. b. Fiscal expenditures should be increased to combat recession. c. Government should encourage foreign direct investments to generate employment. d. Organs trade should be banned across nations.