Lowest elasticities minimize tariff-induced import reduction

Steps:

• Tariff raises domestic steel price, boosting local supply and curbing demand.
• Import reduction equals increased domestic supply plus decreased demand.
• Supply elasticity measures output response to price rise; low value means small supply increase.
• Demand elasticity measures consumption drop; low value means small demand decrease, so minimal import fall.

Why A is correct:

• With supply elasticity 0.2 and demand 0.4 (both inelastic), quantity responses are smallest per elasticity definition, yielding tiniest import reduction.

Why the others are wrong:

• B: Elasticities (1.0 supply, 0.8 demand) allow larger quantity shifts, increasing import drop.
• C: Even higher elasticities (1.5 supply, 1.0 demand) amplify responses, maximizing import reduction.
• D: Highest elasticities (2.0 supply, 1.2 demand) cause biggest quantity changes, largest import decline.

Final answer: A