ebu Posted January 10, 2016 Report Share Posted January 10, 2016 Hello, I'm currently working on my third economics IA on international economics but I encountered some problems with graphing. I want to illustrate the effect of change from per unit tariff to Ad valorem tariff but I'm not sure how to graph the diagrams? Does anyone know how to distinguish 'per unit tariff diagram' from 'Ad valorem tariff diagram'? Thank you so much in advance! 1 Reply Link to post Share on other sites More sharing options...
King112 Posted January 10, 2016 Report Share Posted January 10, 2016 The supply curve in an ad valorem tax diverges from the original curve,unlike a parallel shift in a regular tax. Reply Link to post Share on other sites More sharing options...
EconDaddy Posted January 11, 2016 Report Share Posted January 11, 2016 Hello Ebu, While what King112 says is true for upward sloping supply curves, if you're using a perfectly elastic (horizontal) Sworld supply curve in your international trade (open economy) diagram, then the ad valorem (percentage) tax/tariff will be represented by an Stariff curve which is parallel the original Sworld curve. This is because a given percentage tax will always increase the S curve by that % (of the price) at each quantity sold, so when the P is the same at each quantity, then the S curve including the % tariff will also be horizontal. Please let me know if you have any further questions. Good luck with your commentary, EconDaddyIB Economics examiner, teacher and tutorwww.econdaddy.com 1 Reply Link to post Share on other sites More sharing options...
ebu Posted January 12, 2016 Author Report Share Posted January 12, 2016 The supply curve in an ad valorem tax diverges from the original curve,unlike a parallel shift in a regular tax. I wasn't referring to the microeconomic context but rather an international economic situation of tariff (more specific than tax). Reply Link to post Share on other sites More sharing options...
King112 Posted January 13, 2016 Report Share Posted January 13, 2016 The supply curve in an ad valorem tax diverges from the original curve,unlike a parallel shift in a regular tax. I wasn't referring to the microeconomic context but rather an international economic situation of tariff (more specific than tax). Oh, as in a tariff is imposed on a good?Then very honestly, if I were you, i would just draw the regular tariff graph (the one with the world price is perfectly elastic and the tariff is above the world price line).Hope this helpsCheersKing112 Reply Link to post Share on other sites More sharing options...
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