Some of largest import tariffs-tax on imported goods

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Reference no: EM131240996

Some of the largest import tariffs, the tax on imported goods, are on shoes. Strangely, the cheaper the shoes, the higher the tariff. The highest U.S. tariff, 67%, is on a pair of $3 canvas sneakers, while the tariff on $12 sneakers is 37%, and that on $300 Italian leather imports is 12% (Blake W. Krueger, "A Shoe Tariff With a Big Footprint, " Wall Street Journal, November 22, 2012). Laura buys either inexpensive, canvas sneakers ($3 before the tariff) or more expensive gym shoes ($12 before the tariff) for her many children. Use an indifference curve-budget line analysis to show how imposing these unequal tariffs affects the bundle of shoes that she buys compared to what she would have bought in the absence of tariffs. Can you confidently predict whether she'll buy relatively more expensive gym shoes after the tariff? Why or why not?

Reference no: EM131240996

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