4.1.4 Protectionism Flashcards
1
Q
Tariffs
A
A tax placed on an import to increase its price and decrease its demand
2
Q
Reason for Tariffs
A
- Protect domestic firms from foreign competition
- Raise funds for education/healthcare
- Environmental reasons (e.g. cigarettes)
3
Q
Advantages of Tariffs
A
- Ensures better job security as domestic firms are protected
- Allows domestic firms to sell more as they gain a price advantage over foreign firms
4
Q
Disadvantages of Tariffs
A
- Some products are price inelastic meaning customers will still pay even with import costs added
- Other countries may retaliate by imposing their own tariffs, nullifying the benefits for the original economy
5
Q
Quota
A
A physical limit on the quantity of goods imported or exported
6
Q
Advantages of Quotas
A
- Protects jobs of domestic firms as without, foreign firms can dominate the market and push out domestic firms
7
Q
Disadvantages of Quotas
A
- Complex for the country using them as they require alot of paperwork
- Does not raise tax revenue like tariffs
8
Q
Government Legislation
A
When tariffs and quotas can’t be used, countries may use legislation to protect their domestic firms from floods of cheap imports by imposing legislation (e.g. no fake products)
9
Q
Advantages of Government Legislation
A
- Very powerful tool in preventing fake imports
- Customers within the economy can trust the products are real which makes them spend more
10
Q
Disadvantages of Government Legislation
A
- Costly to implement
- Impossible to guarantee all imports are real and so some may be fake
11
Q
Domestic Subsidies
A
Giving money to domestic firms to make their goods cheaper on the market making demand for foreign goods decrease
12
Q
Advantages of Domestic Subsidies
A
- Encourages domestic firms to increase production which can lead to more jobs meaning more tax being paid to the government
- Helps domestic firms gain access to EOS
13
Q
Disadvantages of Domestic Subsidies
A
- Costly to the government to provide the funds to firms
