Question

In 2 or 3 sentences, explain how a tariff on cars can reduce the demand for imported cara.

Answer 1

The correct answer is: "a tariff increases the price of imports if compared to domestically-produced goods".

A tariff is an instrument established by protectionist policymarkers and it works as a sort of tax imposed on imported goods. The effect of the tariff is the increase in the price of such imports, if compared to the situation without tax. This instrument is typically used to protect more inefficient domestic producers from foreign competition, as they cannot compete in prices with cheap imports, that attract much more consumers due to their attractive price.

With the introduction of the tariff, the price of imports increases and, according to the law of demand, the quantity that consumers are willing to purchase of that product decreases.

Answer 2

Tariffs are taxes implemented on those products that are imported into the country. A tariff on cars can reduce the demand for imported cars because it makes the car to be more expensive in price, thus, consequently making potential get discouraged if ever they're on a tight budget.