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Conclusion and Comments.
1. Consumption value in internal prices exceeds production value in 
internal prices. The difference is income from the import tariff. While analyzing 
the diagram we implicitly assumed that all income of the country (both of 
producers and of the government) is at the disposal of consumers and that there 
are no distortions in this process. Another extreme case is when the income from 
the tariff is not received by consumers at all, then consumption is characterized 
by the intersection point of consumption ray under the tariff and prices under the 
tariff.
2. Reallocation. Suppose that the economy is described by the H-O model. 
Then the import tariff results into a Decrease in national welfare. The shift of 
production towards imported goods. According to the S-S theorem, it leads to an 
increase in real returns for the factor intensively used in the import sector and to 
a decrease in real returns of the factor intensively used in the export sector. 
Thus, the tariff will lead to an increase in returns of the scarce production factor 
and a decrease in returns of the more abundant factor. 
 
 
 
 
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52 
References: 
1. By 
Robert Hall
, 
Marc Lieberman
and 
Geoffrey A. Jehle
. Macroeconomics: 
Principles And Applications, Mastery Study Guide - 98 Edition. South-Western 
Publishing Co. 1998. 
2. Domestic Policies and International Trade//
https://saylordotorg.github.io/ 
text_international-economics-theory-and-policy/ 
 
3. Jehle, Geoffrey. Instruments of Trade Policy., Munich Personal RePEc 
Archive, Vassar College, 2013.
4. Samuelson, Paul (2001). "A Ricardo-Sraffa Paradigm Comparing the Gains 
from Trade in Inputs and Finished Goods". Journal of Economic 
Literature. 39 (4). 
5. The American Economic Review, Vol. 74, No. 5 (Dec. 1984), pp. 1016-1032.