protectionism Flashcards
(2 cards)
2 advantages of protectionism
direct source of tax rev- can help government spending aimed at supporting domestic industries further, such as subsidies or investment in infrastructure boosting comp helping trade.
helps infant industries- shields them from intense global competition, and allows them time to develop and grow. With reduced competition due to implementation of p, they can increase production, improve efficiency, and lower average costs over time and gain EOS as supply increases. help them in LR be more globally comp (risk of retaliation tho)
2 disadvantages of protectionism
market distortions- loss of CONSUMER SURPLUS (DWL too). increase in p, decrease in choice as supply decreases both reduce the gains from free trade as can lead to an increase in raw materials further driving up firms costs which reduces incentives for domestic firms to innovate or improve. undermines the principles of free trade, reducing economic efficiency, consumer choice, and the potential for global economic growth.
regressive- a lot of tariffs go on low priced items like clothes that low income households buy a lot of and spend most of their income of- will increase their apc which is harmful making it harder to move toward freer trade policies as trade is not cheaper or easily
