Use an indifference curve budget line analysis

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Reference no: EM131241578

Some of the largest import tariffs are on shoes. Strangely, the cheaper the shoes, the higher the tariff. The highest US tariff. 67%, is on a pair of $3 canvas sneakers, while the tarriff on $12 sneakers is 37% and that on $300 Italian leather imports is 12%. Laura buys either inexpensive canvas sneakers ($3 before tariff) or more expensive gym shoes ($12 before 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: EM131241578

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