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
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
3
Q
what does tariffs do to price and demand?
A
- increase its price = consumer
- decrease demand
4
Q
why impacts do tariffs have on the government?
A
- raise revenue
- correct a trade imbalance (imports>exports)
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
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
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
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