Question

Use the four-step process to analyze the impact

of a reduction in tariffs on imports of iPods on the

equilibrium price and quantity of Sony Walkman-type products.

Short answer

The demand for iPods increases.

Step-by-step solution

Step 1.Terrifs.

A tariff is a type of tax levied by a country on an imported good at the border. As a protectionist tool, a tariff increases the prices of imports.

Step 2.4 step approach.

1. Reduction in tariff on imports of iPods affect the demand for sony walkman and iPods both.

2. as the tariffs are less now so the seller import more iPods at decreased prices.

3. Because of this the price of iPods decreases and the demand increases because of decreased price.

4. Demand for sony walkman decreases because of the price decrease of substitute goods which is the ipod.