If a domestic market will impose a tariff on a foreign good it will lead to an increase in the domestic price, since a part of the price will now be given to the government in the form of tariff.
If the foreign market has a highly inelastic supply it means that the nation does not respond to a change in price, whereas a highly elastic demand in the domestic market means that the consumers in the domestic market respond to a change in price and might consume lesser of the good if the price is increased. In such a scenario the foreign national will have to pay the bulk of the tax.
Get Answers For Free
Most questions answered within 1 hours.