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A-Level Economics · Tariff diagram question

EVALUATION: who actually pays for the tariff?

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The diagram

The answer

Domestic consumers — they pay PW+T on every unit they still buy, and they buy less of it. Follow the money: the consumer pays more and gets less. The producer's gain and the government's revenue are transfers out of the consumer's pocket — and the two triangles nobody gets at all. The consumer pays PW+T instead of PW and cuts back from Q₂ to Q₄. Part of what they lose becomes domestic producer revenue, part becomes government revenue HJCB, and triangles ABH and JCE are destroyed outright. That is the deeper point that earns marks: a government protects on behalf of its own producers and workers, while free-trade economists answer on behalf of consumers — who are the majority. And retaliation can take the exports too.

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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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