Barriers and protection - Edexcel Unit 4

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Harry Bindloss
BARRIERS AND PROTECTION
Protectionism: The intervention by governments in the free trade between nations. The
methods available usually attempt to reduce imports (to protect domestic production) and
are therefore often referred to as trade barriers, although other methods may seek to
encourage exports.
Tariffs: Taxes levied by the government on imports of particular goods. The effects of a
tariff are decreased imports and this will mean that the domestic producers are now
protected. If imports are reduced then this will mean that the country will have to start
making them more domestically.
When taxes are included then it leads to price increasing and makes S1 move to S2. It then
leads to demand to decrease to D2. Therefore imports have decreased. Because of this tariff
it means that they have made more tax revenue.
The welfare loss to society occurs because price has increase so it has forced some people
out of the market as they cannot afford to buy the product anymore. Overall the
government is subsidising their domestic producers. In the long run it is not helpful as you
are not exposing them to competition x-inefficiency.

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Harry Bindloss
Due to imports being more expensive, consumers will switch to local goods and therefore
there will be more jobs. However it goes directly against the law of comparative advantage.
This is because the outside goods may actually be cheaper. This can delay or prevent
structural change. If you tariff your imports other countries may do the same back and
therefore a tariff war may occur meaning tariffs can be used as a political weapon.…read more

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Harry Bindloss
We want to control the amount of goods coming in therefore supply will increase. There will
then be a gain for domestic producers as they supply at a higher price and imports have
decreased. AD can shift to the right causing a forward multiplier effect. It will protect
domestic industries and jobs. Could lead to x-inefficiency due to over protectionism and the
firms aren't exposed to competition.…read more

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Harry Bindloss
3. Protection against low-wage foreign labour ­ Cheap foreign labour allows foreign
firms to then have advantage over the domestic firms. However cheap labour a
source of comparative advantage.
4. Protectionism against `unfair' foreign competition ­ On the part of foreign
businesses takes the form of two particular practices:
Dumping- Selling goods on a foreign market below their costs of production.
This could be in order to destroy the domestic competition and create a
monopoly position in which prices can be raised.…read more

Comments

davidsalter

This is a sound document that analyses trade barriers well although it needs further evaluation. Good graphs on quotas and tariffs.

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