Scenario: Suppose the world price is $2 per bushel, and U.S. wheat growers are dissatisfied with the level of wheat imports into the United States. They lobby Congress for a $1 per bushel tariff on imported wheat. The following figure shows the U.S. wheat market.
-Refer to the scenario above.How much wheat is imported into the United States after the imposition of the tariff?
Definitions:
Normal Good
A good for which demand increases when consumer income rises, and decreases when consumer income falls.
Income Effect
The change in an individual's or economy's income and how that change affects the quantity demanded of a good or service.
Substitution Effect
The change in consumption patterns due to a change in relative prices, holding the consumer's overall utility constant.
Income Effect
The Income Effect describes how changes in an individual's income affect their purchasing capacity and thus their demand for goods and services.
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