• 0 Posts
  • 1 Comment
Joined 2 years ago
cake
Cake day: September 2nd, 2023

help-circle
  • The difference is that this way it’s much easier to calculate prices.

    If the tax were 20%, the exporter would have to do the inverse calculation. That is, “which price will result in me gaining $1000?” Which is not 1200, since 20% of 1200 is 240. x = 0.8y -> y = (1/0.8)*x -> y = 1.25x. so the exporter would have to price it at 1.25x the price, $1250. 20% of 1250 is 250.

    So it’s unintuitive that a 20% tax would result in a 25% price increase. That’s my guess why tariffs are applied to the importer instead of exporter.