protectionism - tariffs Flashcards

1
Q

what is protectionism?

A
  • Protectionism is when a government seeks to protect domestic industries from foreign competition
  • by making it harder and more expensive for overseas companies to export your country
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2
Q

what is tariff?

A
  • a tariff is a tax placed on an import
  • restrict imports
  • idea = consumers switch to a domestically produced product
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3
Q

what does tariffs do to price and demand?

A
  • increase its price = consumer
  • decrease demand
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4
Q

why impacts do tariffs have on the government?

A
  • raise revenue
  • correct a trade imbalance (imports>exports)
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5
Q

what impact do tariffs have on domestic businesses?

A
  • increased demand for their product over foreign competition
  • they become more competitive
  • more revenue, profit and growth
  • protects local businesses from foreign competition = can help domestic brands when their products become technologically obsolete or internationally uncompetitive
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6
Q

what impacts do tariffs have on foreign businesses?

A
  • loss of demand = loss of revenue
  • a reduction in production can mean loss of jobs
  • charge higher to make a profit = lose competitive advantage
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7
Q

advantages of tariffs

A
  • job creation and security
  • more profitable businesses
  • supports economic growth GDP
  • governments can use tax revenue to improve services and infrastructure
  • limit dumping (where foreign goods flood domestic markets at low prices)
  • can stop poor-quality products from entering the economy
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8
Q

disadvantages of tariffs

A
  • overreliance on the tariff by domestic producers
  • reduce trade opportunities due to retaliation
  • inelastic PED renders tariff ineffective
  • consumers pay higher price - loss of disposable income on other things
  • reduces consumer choice
  • reduces competition = domestic businesses become inefficient
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