Trade Restrictions

Trade Restrictions - TRADE RESTRICTONS TARIFFS Reasons for...

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TRADE RESTRICTONS TARIFFS
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Reasons for Trade Restrictions The four main reasons why nations impose restrictions on trade are: To raise revenue (in poor economies) To control consumption To reduce balance of trade deficit To help protect domestic industry against int'l competition. ( Most important )
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TARIFFS The most common type of trade restriction is the TARIFF. A tariff is a charge on the item imported/exported. A specific duty is a fixed amount per item of the product. An advalorem tariff is a fixed %age of the value of the product. A compound tariff is advalorem + specific duty.
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EFFECTS OF A TARIFF The effects of an Import Tariff on a small (Market size) nation: Price increases Production increases Consumption decreases Welfare lowered .
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PROBLEM Product Y – DD curve - Coordinates (0,8) & (80,0) with constant opportunity costs. SS curve - P(Y) = $1 with free trade; tariffs=100% ad valorem.
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This note was uploaded on 11/07/2010 for the course ECON 0001 taught by Professor Kitsikopoulos during the Spring '08 term at NYU.

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Trade Restrictions - TRADE RESTRICTONS TARIFFS Reasons for...

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