Methods of Protectionism

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Quotas, subsidies and tariffs
jamesofili
Note by jamesofili, updated more than 1 year ago
jamesofili
Created by jamesofili almost 10 years ago
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Tariffs Q1 is produced domestically and Q1Q4 is imported The introduction of a tariff shifts the price of imported goods from P2 to P1 Now, Q2 is produced domestically and Q2Q3 is imported This increases demand for domestically produced goods but reduces consumer surplus and consumer welfare as less people benefit from the good.

Subsides Q1 is produced domestically and Q1Q2 is imported The subsidy shifts the domestic supply curve to the right Now, Q3 is produced domestically and Q3Q2 is imported Unlike tariffs and quotas, price to consumers does not rise However, subsidy allows inefficient domestic production - allocative and productive inefficiency

Quotas Limiting the world supply increases the price from P to P1 This increases demand for domestically produced goods There may also be a windfall gain for some foreign suppliers

Tariffs

Subsidies

Quotas

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