The production effect of a tariff refers to the impact that a tariff has on domestic production. When a tariff is imposed on imported goods, it makes those goods more expensive compared to domestically produced goods. This encourages consumers to buy more domestic products, thereby increasing domestic production.
In words, the production effect can be described as the increase in domestic production that occurs as a result of the tariff. This happens because the tariff raises the price of imported goods, making domestic goods relatively cheaper and more attractive to consumers. As a result, domestic producers are able to sell more of their products, leading to an increase in production.
On a diagram, the production effect can be shown by shifting the supply curve for domestic goods to the right. This shift represents the increase in domestic production due to the tariff. The area between the new supply curve and the original supply curve represents the additional domestic production that occurs as a result of the tariff.
To compute the value of the production effect, you would need to calculate the difference in domestic production before and after the tariff is imposed. This can be done by comparing the quantity of domestic goods produced at the original price (before the tariff) to the quantity produced at the new, higher price (after the tariff). The difference between these two quantities represents the production effect of the tariff.