How does the imposition of a tariff on the market for cigarettes in Italy affect its consumers and producers?

Suppose the Italian government wants to curb consumption of international cigarettes, such as Marlboro, that are imported from countries like the United States. They may implement a protectionist measure, such as a tariff, or a tax on imports which is designed to restrict imports and raise government revenue, to accomplish this. For consumers, the prices become higher than before, and consumer surplus, the difference between the amount consumers are willing to pay and the amount they actually pay, is lost, however consumer welfare may actually improve in this scenario, as less cigarettes are now being purchased. Domestic producers gain revenue, as they can now produce at a higher output and sell at a higher price, however foreign producers lose out, as the tariff decreases the quantity demanded of their cigarettes.

FK
Answered by Feo K. Economics tutor

1619 Views

See similar Economics IB tutors

Related Economics IB answers

All answers ▸

Evaluate the impact of a price ceiling


Explain what is meant by PED (Price elasticity of demand)


Using a price ceiling diagram, analyse the impact a maximum price might have on the market for food.


Explain the meaning of the law of demand; distinguish between movements along and shifts of the demand curve.


We're here to help

contact us iconContact ustelephone icon+44 (0) 203 773 6020
Facebook logoInstagram logoLinkedIn logo

© MyTutorWeb Ltd 2013–2025

Terms & Conditions|Privacy Policy
Cookie Preferences