Canadian Wall Board (Sheet Rock) Tariff
17
Price of Wall Board Quantity of Wall Board S* D* “A” Q e P (Domestic) Market for Wall Board (Canada) The Market for Wall Board is in some relative equilibrium at a Price of “P (Domestic)” and Market Quantity “Qe” at Point “A”
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Transcript of Canadian Wall Board (Sheet Rock) Tariff
Price ofWall Board
Quantity of Wall Board
S*
D*
“A”
Q e
P (Domestic)
Market for Wall Board(Canada)
The Market for Wall Board is in some relative equilibrium at a Price of “P (Domestic)” and Market Quantity “Qe” at Point “A”
Price ofWall Board
Quantity of Wall Board
S*
D*
“A”
Q e
P (Domestic)
P (International)
Market for Wall Board(Canada)
US Exporters of Wall Board are willing and able to sellWall Board in Canada for a much lower price.
Call this Price “P (International)”
Price ofWall Board
Quantity of Wall Board
S*
D*
“A”
Q e
P (Domestic)
P (International)“B”
Q D
Market for Wall Board(Canada)
At “P (International)” the DOMESTIC Quantity Demanded inCanada is “QD” at Point “B”.
Price ofWall Board
Quantity of Wall Board
Market for Wall Board(Canada)
S*
D*
“A”
Q e
P (Domestic)
P (International)“B”“C”
Q D
DomesticProduction
Q SDomestic
However, at “P (International)” the DOMESTIC Quantity Supplied (“Domestic Production”)
is now “Q S” at Point “C”.
“C”
Price ofWall Board
Quantity of Wall Board
Market for Wall Board(Canada)
S*
D*
“A”
Q e
P (Domestic)
P (International)“B”“C”
Q D
“IMPORTS”DomesticProduction
Q SDomestic
“C”
The Difference between Quantity Demanded “Q D” and Domestic Quantity Supplied “Q S Domestic”is made up with IMPORTS of Wall Board from the US.
Price ofWall Board
Quantity of Wall Board
Market for Wall Board(Canada)
S*
D*
“A”
Q e
P (Domestic)
P (International)“B”“C”
Q D
DomesticProduction
Q SDomestic
LLost Domestic Production
Key Point: As a result of the increase in Imports from the US at a lower price, Domestic Producers decrease production
by the difference between “Qe” and “Q S Domestic”(which they now supply)denoted by “LOST DOMESTC PRODUCTION”
This will not make Canadian producers and their employees happy.
What can they do?“IMPORTS”
Price ofWall Board
Quantity of Wall Board
Market for Wall Board(Canada)
S*
D*
“A”
Q e
P (Domestic)
P (International)“B”“C”
Q D
P International
Plus Tariff
Q D1
DomesticProduction
Q SDomestic
Lost Domestic ProductionLost Domestic
Production
LLost Domestic Production
They can lobby for a TARIFF to be levied on the Imports.
The Tariff will increase the price of the Imported Wall Board by some amount greater than the Import price “P (International)”
Let’s call the new price “P International Plus Tariff”
“IMPORTS”
Price ofWall Board
Quantity of Wall Board
Market for Wall Board(Canada)
S*
D*
“A”
Q e
P (Domestic)
P (International)“B”“C”
Q D
“D”P International
Plus Tariff
Q D1
DomesticProduction
Q SDomestic
Lost Domestic ProductionLost Domestic
Production
LLost Domestic Production
At “P International Plus Tariff” the Quantity DemandedIs now “Q D1” at Point “D”
“IMPORTS”
Price ofWall Board
Quantity of Wall Board
Market for Wall Board(Canada)
S*
D*
“A”
Q e
P (Domestic)
P (International)“B”“C”
Q D
“D”
Q D1
“E”
DomesticProduction
P International
Plus Tariff
Q SDomestic
Q s1
Domestic
At “P International Plus Tariff” the Quantity SuppliedIs now “Q S 1” at Point “E”.
NOTE: Look at happens to “Lost Domestic Production”In the next slide.
“IMPORTS”
Price ofWall Board
Quantity of Wall Board
Market for Wall Board(Canada)
S*
D*
“A”
Q e
P (Domestic)
P (International)“B”“C”
Q D
“D”
Q D1
“E”
DomesticProduction
P International
Plus Tariff
Q SDomestic
Q s1
Domestic
LLost Domestic Production
Lost Domestic Production
Lost Domestic Production gets smaller as Domestic Production
INCREASES in response to the higher price.“IMPORTS”
Price ofWall Board
Quantity of Wall Board
Market for Wall Board(Canada)
S*
D*
“A”
Q e
P (Domestic)
P (International)“B”“C”
Q D
“D”
Q D1Q s1
Domestic
“E”
DomesticProduction
“IMPORTS”
P International
Plus Tariff
Q SDomestic
LLost Domestic Production
“IMPORTS”
Notice what happened to IMPORTS of Wall Board.
Imports are now the difference between “Q D1” andQ S1”. LESS than they were before the Tariff.
Price ofWall Board
Quantity of Wall Board
Market for Wall Board(Canada)
S*
D*
“A”
Q e
P (Domestic)
P (International)“B”“C”
Q D
“D”
Q D1Q s1
Domestic
“E”
DomesticProduction
DomesticProduction w/Tariff “IMPORTS”
P International
Plus Tariff
Q SDomestic
“IMPORTS”
KEY POINT: With the Tariff Domestic Producersproduce more of Wall Board than without BUT still
less than when there were no imports of Wall Board.Good for them!
However, the Tariff prevents consumers and homebuildersfrom purchasing Wall Board at a lower price.
Bad for them!
Price ofWall Board
Quantity of Wall Board
Market for Wall Board(Canada)
S*
D*
“A”
Q e
P (Domestic)
P (International)“B”
Q S
“C”
Q D
“D”P International
Plus Tariff
Q D1
“E”
Q s1
Domestic
Price ofWall Board
Quantity of Wall Board
Market for Wall Board(Canada)
S*
D*
“A”
Q e
P (Domestic)
P (International)“B”
Q S
“C”
Q D
“D”P International
Plus Tariff
Q D1
“E”
Q s1
Domestic
“DWL”
Price ofWall Board
Quantity of Wall Board
Market for Wall Board(Canada)
S*
D*
“A”
Q e
P (Domestic)
P (International)“B”
Q S
“C”
Q D
“D”P International
Plus Tariff
Q D1
“E”
Q s1
Domestic
“DWL”“DWL”
Price ofWall Board
Quantity of Wall Board
Market for Wall Board(Canada)
S*
D*
“A”
Q e
P (Domestic)
P (International)“B”
Q S
“C”
Q D
“D”P International
Plus Tariff
Q D1
“E”
Q s1
Domestic
“DWL”“DWL”
Tax Revenue
Price ofWall Board
Quantity of Wall Board
Market for Wall Board(Canada)
S*
D*
“A”
Q e
P (Domestic)
P (International)“B”
Q S
“C”
Q D
“D”P International
Plus Tariff
Q D1
“E”
Q s1
Domestic
