Question

A tariff is a tax on imported goods. Suppose the U.S. government cuts the tariff on imported flat screen

televisions. Using the four-step analysis, how do you think the tariff reduction will affect the equilibrium price and

quantity of flat screen TVs?

Short answer

Supply curve shifts towards right.

Step-by-step solution

Step 1. Meaning 

Equilibrium is when

Quantity demanded$=$Quantity supplied

(Equilibrium is considered as ideal situation.

Step 2. Diagram 

Demand-supply curve equilibrium before

the U.S. government cuts the tariff on imported flat screen televisions.

Step 3. Explanation 

when the U.S government cut the tariff than it would be easier to access the market hence the supply of Flat screen T.V increases

Step 4. Explanation 

due to the increase in supply, the curve will shift towards the right & the demand curve remains the same, people will have more choices but that doesn't impact the demand curve

Step 5. Diagram

With the shift in the supply curve, the equlibriunm price of T.V decreased & the Equilibrium Quantity increased thus, a new equilibrium formed, shown in the figure.