1. Quotas A physical limit on the quantity of the good imported. Increases the share of the market available for domestic producers. http://www.japantoday.com/category/business/view/hope-fades-tpp-pact-could-end-japans-butter-shortage But it does cause welfare loss….

3. Welfare loss from quota S D1 QS 1 SWSW PWPW D QD 1 QD 2 Loss in consumer surplus is A+B+C+D Quota amount decided, added to domestic production Gain in producer surplus is A Who receives C? Generally importers, so welfare loss is B+C+D QS 2 P W +q A B C D So tariffs are better than quotas

5. Subsidies Can be used to increase exports and reduce imports. Export subsidies to increase exports and support industries Subsidies to reduce imports – subsidising firms that compete with imports.

6. Welfare loss from subsidy S D1 S D2 QS 1 SWSW PWPW P W - S A B C E D D QD 1 QS 2 Original producer surplus is A New producer surplus is A+B+C+D Gain in producer surplus is B+C+D Subsidy costs taxpayers A+B+C+E So loss from subsidy is A+B+C+E minus B+C+D Which is A+E-D Since A is the same as D the loss is E S

7. Why have trade restrictions? If countries specialise according to comparative advantage there are major gains from trading Tariffs, quotas and other restrictions lead to welfare loss, so why do some countries have protectionist policies?

8. Protect infant industries Protect strategic industries e.g. EUs Common Agricultural Policy is to create food security for Europe by protecting its agricultural sector. Protect non-renewable resources Deter unfair competition Save jobs Help the environment Limit over-specialisation Why do countries protect?