Demand and supply for television use (pay per view) by choice is described by the following demand and supply functions (v represents the price per item)
Demand = 198 - 2v
Supply = -2 + 2v
The world market price for TV use is € 30. Price per item.
a. Calculate domestic production, domestic consumption, and import. Draw a picture and calculate and benefit from the opening of a business.
b. Decision is now made to impose a 30% duty on the world market price of imports (foreign streaming services), but the government has now found that traditional duty can be collected through credit card companies transactions (no VAT).
i) What will be the price, imports, demand, and domestic supply.
ii) How do producer and consumer profit change from point a?
iii) What will be the macroeconomic loss due to duty compared to free trade without VAT?
Demand and supply for television use (pay per view) by choice is described by the following demand and supply functions (v represents the price per item)
Demand = 198 - 2v
Supply = -2 + 2v
The world market price for TV use is € 30. Price per item.
a. Calculate domestic production, domestic consumption, and import. Draw a picture and calculate and benefit from the opening of a business.
b. Decision is now made to impose a 30% duty on the world market price of imports (foreign streaming services), but the government has now found that traditional duty can be collected through credit card companies transactions (no VAT).
i) What will be the price, imports, demand, and domestic supply.
ii) How do producer and consumer profit change from point a?
iii) What will be the macroeconomic loss due to duty compared to free trade without VAT?
