4. Suppose the following table reflects the domestic supply and demand for 4GB f

Question

4. Suppose the following table reflects the domestic supply and demand for 4GB flash drives: Price ($): 15,13,11,9,7,5,3,1 Quantity Supplied (000’s): 8,7,6,5,4,3,2,1 Quantity Demanded (000’s): 2,4,6,8,10,12,14,16 b. Now suppose that foreigners enter the market, offering to sell an unlimited supply of flash drives for $7 apiece. Illustrate and identify (1) the market price, (2) domestic consumption, and (3) domestic production. c. If a tariff of $2 per flash drive is imposed, what will happen to (1) the market price, (2) domestic consumption, and (3) domestic production?

Explanation / Answer

Equilibrium price = $11 as QS=QD=6

At $7, QS=4 QD=10

After tariff, price will be $9; domestic supply= 5 and domestic consumption =8

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