The following headline appeared in the Economic Times: "Import duty on crude and refined edible oil up by 5% " Use a diagram and economic theory to analyse the impact of the statement on the supply of crude and refined edible oil in the domestic market.
The following headline appeared in the Economic Times: "Import duty on crude and refined edible oil up by 5% " Use a diagram and economic theory to analyse the impact of the statement on the supply of crude and refined edible oil in the domestic market.
When import duty on crude and refined edible oil is up by 5 per cent, there will be an increase in the cost of imports.
Accordingly, producers will supply less crude and refined edible oil at the existing price, or they will sell the same quantity only at a higher price.
This implies a backward shift in the supply curve or decreases in supply as in figure S1is the initial supply curve. When the government increases import duty, the supply curve shifts to the left from S1 to S2
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When import duty on crude and refined edible oil is up by 5 per cent, there will be an increase in the cost of imports.
Accordingly, producers will supply less crude and refined edible oil at the existing price, or they will sell the same quantity only at a higher price.
This implies a backward shift in the supply curve or decreases in supply as in figure S1is the initial supply curve. When the government increases import duty, the supply curve shifts to the left from S1 to S2
Explore more such questions and answers at BYJU’S.
