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A-Level Economics · Tariff diagram question

Under free trade the world price is PW. Which distance shows IMPORTS before the tariff?

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The answer

The distance A E. At PW domestic firms supply only Q₁ but consumers want Q₂ — the excess demand A to E is filled by the world. Talk about EXCESS DEMAND before you talk about imports. At the world price PW domestic supply reaches only A (Q₁) while domestic demand extends to E (Q₂). The shortfall A to E is exactly what foreign producers supply — that IS the imports.

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This is one of 6 questions on the tariff diagram — every corner lettered, every wrong answer diagnosed.

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