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:checkered_flag:Types of Protectionism:checkered_flag: (before…
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Types of Protectionism
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Tariffs (most common type of anti-dumping measures
A tax that is charged on imported goods
placed on the foreign producers
shift the
Sw
upwards by the amount of the tariff to
Sw+tariff
so,
Pw+tariff
will be higher than
Pw
Total dd for imported goods will fall, as price has risen & total dd fro domestic goods will rise, as much cheaper
because the price of tariff that have to be paid by the importers to the government will be passed on to producers (give examples) and then eventually to consumers.
reduce imports' competitiveness
increase domestic producers' revenue
mention the revenue boxes in the essay
decrease the foreign producers' revenue
as the excess dd that needs to be fulfilled in the market decrease
they receive Pw+T, but have to pay the tariff amount to the government
the government receive tariff revenue
(mention the revenue boxes)
:!:Further outcomes of tariff:!:
there will be a
dead-weight loss of welfare
, as a fraction of dd will now not be demanded
called as the loss of consumer surplus
the increased domestic production will be produced by relatively inefficient domestic producers, as opposed to efficient foreign producers
the minimum revenue used by foreign farmer to produce the same quantity is lower than that of domestic producer
thus, a box will represent the inefficiency of the domestic producers, since more of the world's resources are being used to produce than are necessary
another dead-weight loss of welfare
Subsidies
An amount of money paid by the government to a firm, per unit of output
government is giving subsidy to domestic producers to make them more competitive
the
Sd
will be shifted to the right (increase) by the amount of subsidy to create curve
Sd+T
market price will remain at Pw
demand will also remains
domestic producers increase production, bcs they are receiving Pw+S per unit that they produce
their revenue increase
(mention the revenue boxes)
foreign producers can supply less as the excess demand that they have to fulfill fall
the government have to pay subsidy (government expenditure)
however, the increase in production is produced by relatively non-efficient producers
represents inefficiency of the domestic producers & a misallocation of the world's resources
dead-weight loss of welfare
Quotas
A physical limit on the numbers of value of goods that can be imported into a country
Excess dd will occur
price will rise if more supply is to be given by foreign producers
importer are not allowed to supply more, because they have filled their quota
domestic producers will begin to enter the market, attracted by the higher price of wheat
they will supply until the new
Eq
but still, at
Eq
, the total dd of product fall
their revenues will rise
they supply at price of
Pquota
their income changes, but does not necessarily fall in income
:!:Dead-weight loss:!:
loss of consumer surplus
increase in production produced by relatively inefficient domestic producers
inefficiency of domestic producers
misallocation of world's resources
before protectionism is implemented
Pw is cheaper than Pq
Consumers will opt for Pw, but supply is Sw
There is an excess demand
Imported goods are used to fulfill the excess demand
Supply faced by importers is perfectly elastic, and below Pe
Domestic farmers are only prepared to produce Qe
Foreign producers will get more than domestic producers
Administrative Barriers
Red Tape
administrative measures that have to be taken when goods are being imported
it he processes are lengthy and complicated
they can act as restriction to imports
border delays
complicated paperworks
large amount of legal works
Health and safety standards and environmental standards
restrictions that is placed on the types of goods that can be sold in the domestic market/ or on the methods used in the manufacture of certain goods
apply to imports and may restrict their country
it is important that governments are legitimately keeping out imports rather than simply protecting their own country's workers
Embargoes
an extreme quota
complete ban on imports and is usually put in place as a form of political punishment
very rare
as a set of economic sanctions against an offending country
or to achieve a desired political objective
Nationalistic Campaign
run by governments
sometimes run marketing campaigns
to encourage people to buy domestic goods rinstead of foreign goods
to generate more dd for domestic goods
to preserve domestic jobs
may be described as "moral suasion"
where the government links consumption of imported goods to the creation of unemployment
