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VCAA 2015 MC Q6

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zenith101:
Hey, could someone please explain the MC q in the title please. Im not sure why a removal or decrease in tariffs leads to a fall in the price of domestic products?

Thanks in advance :))

DoctorTwo:
It's simply because those products are competing. You can refer to microeconomics here to explain the answer. If the price of a substitute (competing product) falls, the demand for the original product is likely to decrease, causing the price to fall. In the same way, if the price of an imported product falls, the prices of domestic products will fall so that the prices match and the goods can compete.

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