tariff disadvantages 4.1.6

Question 1

What is market distortion?

Answer 1

Now that prices have increased from pw to pw+tariff
-there is a consumer loss which means there’s a dead weight loss
there will also be a loss of consumer choice since before they were operating at q2 but now it has decreased to q4 because before they were able to buy product from domestic suppliers and world suppliers.

Question 2

what is production inefficiency?

Answer 2

there will be a worse allocation of resources which means there allocative inefficiency, domestic suppliers producing that extra unit of the good is wasteful they need a higher price in comparison to world suppliers.

Question 3

what is regressive?

Answer 3

In the end, consumers have to bear all these disadvantages specifically it will hurt those who have a lower disposable income, this means the distribution of income worsen and so does equity.

Question 4

what is retaliation?

Answer 4

The domestic government imposing these protectionism measures means the other country could do the same back and this will worsen the benefits of free trade much more.

Question 5

what could be a possible evaluation for these disadvantages?

Answer 5

You have to consider the size of the tariff and what will impact will it have on the market. If the gov decides to impose these measures which is not too strict it won’t put a massive downturn on trade.