Tariff Deadweight Loss – AP Microeconomics

International Trade Simulation

When the World Price ($P_W$) is below Domestic Equilibrium, the country imports goods. A Tariff artificially raises the price to $P_T$.

Welfare Areas

Consumer Surplus (CS): Area below Demand, above current Price. (Shrinks with tariff)

Producer Surplus (PS): Area above Supply, below current Price. (Grows with tariff)

Tariff Revenue: Imports × Tariff Amount. Goes to government.

Deadweight Loss (DWL): Lost mutually beneficial trades + inefficient domestic production. (Total welfare lost).