3.3 Trade Barriers Flashcards
What is a Tariff?
A tax on imports.
What is the A - b - c - D of a tariff?
^ costs v Supply ^ price v Qd.
How is tariff represented on a trade diagram?
Pw + t = Sw + t line above the Pw line but below the origin.
What is the long run affect of a tariff?
If you tariff a country’s products they might retaliate and tariff yours back. (trade war)
What is the short run affect of a tariff?
Producers gain = fewer imports
What is protectionism?
shielding a country’s domestic industries from foreign competition by taxing imports.
How is a decrease in Qd represented in trade?
Increase S dom Q1 to Q3
or
Decrease D dom Q2 to Q4
What is a Quota?
A physical limit on the total number of imports.
What is the A - B - C - D of a Quota?
Increase Limit
Decrease Supply
Increase Price
Decrease Qd
How is the Quota represented on a trade diagram?
Pw + q = Sw + q line above the Pw line but below the origin.
AND a new supply curve shifted to the right labelled S dom + Quota.
What are the imports before quota?
Q1 to Q2
What are the imports after quota?
Q3 to Q4
What is a domestic subsidy?
Payment to domestic producers.
What is A - B - C - D of domestic subsidy?
Decrease Costs
Increase Supply
Decrease Price
Increase Qd
How is a domestic subsidy represented on the diagram?
Pw increases to Ps to create a new equilibrium with Q3
Which moves Sdom to right to S dom + sub
What are the imports before the subsidy?
Q1 to Q2
What are the imports after the subsidy?
Q1 to Q3
Why would a country not want to trade? [6]
National Security
Health and Safety.
Anti Dumping
Unfair competition
Environmental Standards
Protecting new industries or struggling industries.
What is anti dumping?
Because imports are cheaper its could ruin domestic market. Sometimes countries will sell stuff really cheap to dump on other countries because they have too much.
What are sunrise industries?
New small industries.
What are sunset industries?
Struggling industries.
Why should countries not act on protectionism? (No trade barriers)
Fear of retaliation
Increased Costs
Less Choice
Domestic firms have no motivation to become more efficient
Reduced export competitiveness.
Explain how a tariff will affect the price and quantity of imports.
Tariff increase costs of production
Decreases supply Sw to Sw +t
Increases price Pw to Pw+t
Decrease imports Q1 and Q2 to Q3 and Q4
Consumers move to cheaper alternative
