IMPORT DUTIES AND TERMS OF TRADE 143 
Observe that while price rises to the consumer, the total sum 
which is paid to the foreign producer will not rise. The quantity 
bought from the foreigner — the number of units of the commodity 
which are purchased from him — becomes less, while the price 
per unit paid to him will not rise. True, because of the duty the 
consumer will pay a higher price. But the addition to the price 
goes to the government; it has nothing to do with the price re- 
ceived by the foreign exporter. Imports will decline, not because 
a larger price has to be paid to the foreigner for the goods but 
because an addition to the foreigner’s price must be paid in order 
to meet the tax imposed at home. 
The extent to which imports then decline will depend on the 
degree in which the demand for the commodity is elastic — 
whether the elasticity of demand is less or greater than unity. 
If demand be inelastic, the consumer will continue to buy nearly 
the same quantity as before. Imports will decline but little. The 
total sum spent for the article by the consumers will be greater 
than before, and the government will secure a large revenue from 
the tax. If on the other hand demand be elastic, the consumer 
will be led to lessen his purchases of the article very consider- 
ably, and the total sum spent for it will shrink. Then imports 
decline heavily, and the revenue which the tax yields to the gov- 
ernment becomes correspondingly less. 
But, to repeat, in any event imports will decline somewhat. 
And that decline at once sets in motion a train of forces which 
diminish the volume of international trade and at the same time 
cause the barter terms of trade to be more favorable to the country 
imposing the duties. Suppose the tax-imposing country to be the 
United States. That country’s imports for the time become less. 
Exports, however, remain as great as before. Specie flows in, prices 
and money incomes rise. In foreign countries the opposite conse- 
quences ensue. Specie flows out, prices and money incomes fall. 
The reader will readily follow the further consequences. As money 
incomes rise in the United States, consumers will be led to spend 
more on imported goods. They will buy more of other imports 
(those which are not taxed) since these become cheaper as prices