1. Restrictions on free trade
Topic 9: aggregate demand and aggregate supply
Restrictions on free trade

2. 4.1.6 Restrictions on free trade
Students should be able to:
Give reasons for restrictions on free trade
Analyse types of restrictions on trade: tariffs, quotas, subsidies to domestic producers, non-tariff barriers
Evaluate the impact of protectionist policies on consumers, producers, governments, living standards and equality

3. Microeconomics Topic 1: The Economic Problem
Protectionism
Microeconomics Topic 1: The Economic Problem
Free trade uses comparative advantage to maximise _____________ but countries still use protectionism too.
What is protectionism?

4. Why do countries restrict free trade?
Microeconomics Topic 1: The Economic Problem
Why do countries restrict free trade?

5. Types of restrictions on trade
Microeconomics Topic 1: The Economic Problem
Types of restrictions on trade

6. Microeconomics Topic 1: The Economic Problem
Tariffs
Microeconomics Topic 1: The Economic Problem
What is a tariff?
Also called customs duty or import duty
What are tariffs used for?

7. Diagram showing impact of tariffs
Microeconomics Topic 1: The Economic Problem F

8. Explanation of tariff diagram
Microeconomics Topic 1: The Economic Problem F

9. Microeconomics Topic 1: The Economic Problem
Expenditure
Microeconomics Topic 1: The Economic Problem
Expenditure on imports will fall from ___________ to _____________
Of that area, ______________ is the revenue gained by foreign firms and __________ will go to the ______________________

10. Deadweight welfare loss
Microeconomics Topic 1: The Economic Problem
Deadweight welfare loss
Imposing a tariff will lead to a fall in consumer surplus of _______ as they’ll buy less (higher price)
Domestic producers gain __________ producer surplus as they produce more at a higher price
The loss of consumer surplus is more than the gain of producer surplus by KLBA
Of this the government gets _________ in revenue
So the deadweight loss to the country is _____ + _____ A B

11. Definition deadweight welfare loss
Microeconomics Topic 1: The Economic Problem
Definition deadweight welfare loss
Deadweight welfare loss is a loss of economic efficiency. It is a cost to society. A B

12. Microeconomics Topic 1: The Economic Problem
Detailed diagram

13. Microeconomics Topic 1: The Economic Problem
Quotas
Microeconomics Topic 1: The Economic Problem
What is a quota?
What is the impact for:
Customers
Domestic producers
Importers?

14. Microeconomics Topic 1: The Economic Problem
Subsidies
Microeconomics Topic 1: The Economic Problem
Subsidies can be used to _________ exports and __________ imports
Who typically is given export subsidies?
Imports can be reduced by giving subsidies to ___________ firms that compete with foreign firms e.g.
quota

15. Microeconomics Topic 1: The Economic Problem
Non-tariff barriers
Microeconomics Topic 1: The Economic Problem
Quotas, embargoes, export subsidies and exchange controls are all non-tariff barriers
Barriers can be imposed to reduce imports such as:
In some countries governments may manipulate exchange rates (lower exchange rate so exports cheaper and imports more expensive). See 4.1.8
quota

16. Impact of protectionist policies
Microeconomics Topic 1: The Economic Problem
Consumers
Producers
Workers
Governments
Living standards:
Equality:
quota

17. Arguments for free trade (against protectionism)
Microeconomics Topic 1: The Economic Problem
BUT
quota