Suppose the domestic shoe demand and supply equations in a small open economy are:
P = 168-4?D
P = 24+2?S
On the other hand, the shoe demand and supply equations of the large open economy are: Let's assume:
P = 360- 6?D
P = 40 + 2?S
A) Suppose the large country imposes a customs tax of $ 12 per unit of good on top of the free trade price, and the smaller country drops it below $ 4.
For the Large country of customs tax application in the light of above information
What would happen to these:
1- In the welfare of the consumer.
2- In the welfare of the manufacturer.
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