Question

8. In retaliation for stricter trade barriers imposed by Japan, the United States decides to increase the tariffs on Japanese luxury vehicles. Illustrate the impact the increased tariffs will have on the market for Japanese luxury vehicles in the United States.

9. Illustrate how the tariff, detailed in (8) impacts the market for Germany luxury vehicles in the United States.

10. The United States is currently in a recession and real incomes are falling. How will this impact the market for luxury vehicles?

11. Several years ago, in the month of February, severe weather conditions negatively affected rose production in flower growing areas of this country. February is also a month where flower sales are traditionally high, due to the existence of Valentines Day. Illustrate how these events, together, affected the market for roses during that month.

Suppose we see that the quantity exchanged of roses actually increased around Valentine’s Day. Based on your work above, what would explain that? Tie your answers to the graphical work above.

Answer 1

8)

• Luxury Japanese vehicles are high in demand in USA. Imposition of high tariff or taxes would reduce demand for Japanese cars in USA.
• Imposition of tariffs will increase the prices of Japanese cars in USA and these cars now would become less competitive. Less competitive price would reduce demand for such cars.
• Now US manufactured cars shall witness rise in demand for their own domestic cars.
• Average US citizens would have to pay more for luxury cars.
• It will enhance revenue of US government but welfare of general public shall be compromised.