Protectionism

Types of protectionism Tariffs: taxes added to imports↓→↑ price →↓ quantity demanded. Quotas: limits on the number of imports allowed into the country → ↓ supply whilst the same demand → ↑ prices. Subsidies: money given to industries by the government to ↓ their costs & therefore ↓ prices → ↑ domestic industries competitiveness. Embargo: complete ban on certain imports → may be to stop dangerous items or to punish other countries.

Why do this? Infant Industries – protect new industries that cant yet compete with established overseas competitors. Specialisation – to keep a range of industries and avoid specialisation in only a couple (too reliant on them!). Prevent dumping – to stop countries flooding a market with below cost products to weaken domestic firms. Employment – to protect jobs by limiting loss of industries. Retaliation – in response to trade barriers by other countries

Tasks Use a supply and demand diagram to show: –The effect of a tariff. –The effect of a subsidy –The effect of a quota