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Use the four-step process to analyze the impact of a reduction in tariffs on imports of iPods on theequilibrium price and quantity of Sony Walkman-type products.
As shown in above diagram, demand curve of Sony Walkman shifts leftward from $D_{0}$ to $D_{1}$ . As, a result, equilibrium price of Sony Walkman reduces from $P_{0}$ to $P_{1}$ and equilibrium quantity also decrease from $Q_{0}$ to $Q_{1}$ . Also, new equilibrium point will be $E_{1}$ .
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Chapter 3
Demand and Supply
Introduction
How Markets Work
Markets and Welfare
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All right, We're doing problem number 44 40 or from chapter three on. The problem is asking us using the four step process to analyze the impact of a reduction in tariffs and a reduction in tariffs on imports of iPod on iPods on the equilibrium, price and quality of the Sony Walkman type products. Sorry, that was a bit of a mouthful. Um, okay, so were graphing the market for Sony Walkman. Walkman zone of the plural is, um is your supply. There's your command, quantity, praise, and we'll d'oh s w So you know, this is a Sony Walkman, and we're also gonna graph iPods. I know it's not asking for that, but it'll help if we graph it to see what happens to them. So here's demand your supply. Here's price years quantity for iPods. And since tariffs, we're going down. Well, that means that me more demand, right, because the tariff is a tax you pay to import that good. And if you're not paying God, well, then it's relatively cheaper and more people are gonna want it, which is gonna lead to an increase in price of iPods. So I so my phrases, I pod price up and an iPod, we're gonna assume is a substitute, a competitive er for the Sony Walkman. And if the price of the iPod is relatively more expensive, well, that means the Walkman is relatively cheaper. She's more people gonna wanna buy it. It's an increase of demand for me. Walkman. What does that do to price in quantity? Well, quantity increases price increases.
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