Tariffs

Do now:

State two functions of the price mechanism.

Price signalling (when consumers/producers are signalled in the direction of market forces).

Price rationing (market allocates resources to those who can pay, thereby distributing scarce resources).

Give the formula for price elasticity of demand.

%change in quantity demanded / %change in price

Explain why PED matters when prices rise.

The significance of price in demand for a good

Define globalisation.

Globalisation is the world getting more interconnected through communication, trade and migration

What is meant by trade liberalisation?

Removal of trade barriers

Give one reason firms benefit from international trade.

Expanded markets

What is a trading bloc?

A group of countries (such as the EU) who decide to work together to remove trade barriers.

A tariff is a tax placed on imported goods and services by a government.
Protectionism is government policies that protect domestic industries from foreign competition.
the responsiveness of quantity demanded for a change in price

1. Define import quota.
An import quota is a limit on the quantity of a good that can be imported into a country.

2. What happens to price when a binding quota restricts supply?
The price increases.

3. What is quota rent?
Quota rent is the extra profit earned by firms that are allowed to import under the quota.

4. State one difference between a tariff and a quota.
A tariff is a tax on imports, while a quota limits the quantity of imports.

5. Define domestic subsidy.
A domestic subsidy is financial support given by the government to domestic firms to reduce their costs.

6. Give one example of a non-tariff barrier.
A safety standard.

7. Why might a safety standard act as protectionism?
It can make it harder or more expensive for foreign firms to sell their products, reducing imports.

8. What is an anti-dumping duty designed to prevent?
It is designed to stop foreign firms selling goods below their fair price to gain an unfair advantage.